CONTINUATION PATTERNS
SYMMETRICAL TRIANGLE
-usually this one is a pause in the trend,before resuming the prior trend before the formation of the triangle.
-So,therefore,if the previous trend is up,expect a breakout and resumption of the uptrend.
-the average duration is about few months looking at daily charts.
-If the peaks are connected,we'll get a down sloping line.Connect the troughs,and we'll get an upsloping line.
-The point where these 2 lines could possibly meet is called the apex.
-When we see a symmetrical triangle,we are looking for the contination of the previous trend.Say the previous trend was an uptrend,we expect a breakout.
-When the close of that bar /candle is over the downsloping line connecting all the peaks,we say that a breakout has taken place.
-In a symmetrical triangle,we expect the breakout somehere between the half way to the threequarter point from the apex.
-If prices keep remaining within that triangle even after the threequarter point,that breakout may happen,but now a less powerful pattern.
-Once prices breakout,we could have a pullback ....this upper line that connected all the peaks and was resistance.........now becomes support.
-As in most patterns,volume decreases within the symmetrical triangle.
-On penetration of the upper line,expect a pick up in volume.
Trading :First draw the upper lines.Then the lower lines.If a breakout happens when it should,measure the height of the highest point in the triangle ,annd drop aline to the bottom line of the triangle........Let's call this "x".Now add "x" to the breakout area,...........this is our initial target after which we trail stop upwards.Buy the breakout and add on pullback,and then sit back and enjoy the ride.
Interesting point: Quite a few times,the bullish symmetrical triangle breaks down,just prior to resuming an uptrend..........usually occurs very close to the apex.
-characeterised by a 2-3 days of breakdown on high volume before sharply turning higher and resuming the uptrend.
-So,if we get prices moving near the apex of a bullish triangle,and then a big jump in volume on a breakdown,it's a warning of a shakeout bar/candle.