A triangle is a chart pattern, depicted by drawing trendlines along a converging price range, that connotes a pause in the prevailing trend. Technical analysts categorize triangles as continuation patterns.
- A triangle is a chart pattern, depicted by drawing trendlines along a converging price range, that connotes a pause in the prevailing trend.
- Triangles are similar to wedges and pennants and can be either a continuation pattern, if validated, or a powerful reversal pattern, in the event of failure.
- There are three potential triangle variations that can develop as price action carves out a holding pattern, namely ascending, descending, and symmetrical triangles.
Different type of triangles
Ascending triangle: An ascending triangle is a pattern that forms when the price exceeds the higher horizontal trend line as the volume increases. The top trend line should be horizontal, indicating almost identical vertices forming a resistance level. The lower trend line increases diagonally, indicating higher troughs as buyers patiently increase their offers. Finally, buyers lose patience and rush into security above the price of resistance, which triggers an increase in purchases when the uptrend continues. The higher trend line, which was previously a resistance level, now becomes a support.
Descending triangle: A descending triangle is an inverted version of the ascending triangle and considered as a distribution scheme. The lower trend line must be horizontal, connecting almost identical hollows. The upper trend line declines diagonally to the apex. Decomposition occurs when the price collapses in the lower support of the horizontal trend line when a downward trend resumes. The lower trend line, which was a support, now becomes a resistance.
Symmetrical Triangle: A symmetrical triangle is composed of a diagonal downward trend line and a diagonal lower trend line. When the price gets closer to the apex, it will inevitably exceed the higher trend line for a breakout and the rising price rise or the lower trend line to form a break and a downward trend with falling prices .
Traders should monitor volume peaks and at least two closures beyond the trend line to confirm that the break is valid and not fictitious. Symmetrical triangles tend to be continuous break patterns, which means that they tend to break in the direction of the initial move before the triangle is formed. For example, if an uptrend precedes a symmetrical triangle, traders expect the price to rise.