Other things being equal, the symmetrical triangle denotes continuation of the previous major movement.
A helpful guide as to an advanced forecast of break-away direction is the pattern of the whole movement preceding the beginning of the triangle's formation. If the preceding move has been long and begins to show other signs of possible exhaustion, then the chances are more favorable that the triangle will signal a reversal. Analysis of other and more fundamental factors is also frequently important and helpful in connection with the chart analysis of the symmetrical triangle.
When it comes, the genuine breakout into the new trend (or rapid resumption of the old), is almost invariably confirmed promptly by noticeably greater volume. Frequently, the break comes some distance from the projected apex on our charts. Breakouts which are confirmed by volume and occur early in the formation are almost invariably genuine, whereas breakouts which occur very near the apex are to be viewed with greater suspicion on account of the extreme narrowness of the range which restricts the movement of price there.
Generally, the size of the triangle gives indication as to the likely extent of the subsequent move.
Four significant S/R effects
Post breakout, the lines of the symmetrical triangle often exert a power similar to that of a magnetic field, and are the first line of defense against any return movement of price. If, however, our triangle break away occurred near the apex, then it is the apex level which becomes a significant support or resistance field. So long as these levels resist the return of prices back through them, then the forecast given by the breakout may be considered to be still in effect.
Once prices have worked some distance away from our triangle, any corrections are usually stopped at the approximate level of the extreme top or bottom of the triangle, made at the beginning of its formation.
Finally, the sides of a symmetrical triangle, for the purposes of post-breakout price action, may be considered as minor trend lines in themselves, extending beyond the limit of the apex. This cradle can be expected to exert strong support or resistance upon price, and throwbacks are common.
A helpful guide as to an advanced forecast of break-away direction is the pattern of the whole movement preceding the beginning of the triangle's formation. If the preceding move has been long and begins to show other signs of possible exhaustion, then the chances are more favorable that the triangle will signal a reversal. Analysis of other and more fundamental factors is also frequently important and helpful in connection with the chart analysis of the symmetrical triangle.
When it comes, the genuine breakout into the new trend (or rapid resumption of the old), is almost invariably confirmed promptly by noticeably greater volume. Frequently, the break comes some distance from the projected apex on our charts. Breakouts which are confirmed by volume and occur early in the formation are almost invariably genuine, whereas breakouts which occur very near the apex are to be viewed with greater suspicion on account of the extreme narrowness of the range which restricts the movement of price there.
Generally, the size of the triangle gives indication as to the likely extent of the subsequent move.
Four significant S/R effects
Post breakout, the lines of the symmetrical triangle often exert a power similar to that of a magnetic field, and are the first line of defense against any return movement of price. If, however, our triangle break away occurred near the apex, then it is the apex level which becomes a significant support or resistance field. So long as these levels resist the return of prices back through them, then the forecast given by the breakout may be considered to be still in effect.
Once prices have worked some distance away from our triangle, any corrections are usually stopped at the approximate level of the extreme top or bottom of the triangle, made at the beginning of its formation.
Finally, the sides of a symmetrical triangle, for the purposes of post-breakout price action, may be considered as minor trend lines in themselves, extending beyond the limit of the apex. This cradle can be expected to exert strong support or resistance upon price, and throwbacks are common.