Stocks & Commodities V. 23:1 (124-125): Charting The Market: Triangles by David Penn

Stocks & Commodities V. 23:1 (124-125): Charting The Market: Triangles by David Penn

TRIANGLES

Writing about triangles as significant patterns in technical analysis, trader, author, and educator John Murphy observes that:

"… The triangle is usually a continuation pattern. Its formation signals that a trend has gotten ahead of itself and needs to consolidate for a while. Once that consolidation has been completed, the prior trend usually resumes in the same direction. In an uptrend, therefore, a triangle is usually a bullish pattern. In a downtrend, a triangle is usually bearish."

There is no fault to be found in Murphy’s introduction to triangles. He goes on to note that there are two main varieties of generally “directional” triangles, outside of the basic symmetrical form. But one of the most interesting — and potentially the most rewarding — aspects of triangles is not included in his discussion.

Here is Elli Gifford, writing in her book, The Investor’s Guide To Technical Analysis:

"The triangle is reasonably uncommon as a reversal pattern. It is more often part of a trend, and its resolution signals continuation, but when it is a reversal pattern it is a powerful one. The rising lows and falling highs are evidence of a market argument tightening and, once it is resolved, the prediction — made by measuring its base — is usually fulfilled quickly."