Stocks & Commodities V. 31:2 (62-64): Right-Angle Triangles by Bruce Tintelnot
Right-Angle Triangles by Bruce Tintelnot
When chart patterns form, they can give you some idea on
where prices may be going as they go their own way. Hereís
the right triangle chart pattern, the two types that form, and
what they indicate.
When market technicians began charting trending markets, they observed
that the charts formed recognizable patterns as the bulls or
the bears struggled for control of prices. Some of the patterns are
consistent with the continuation of a trend and some often indicate a trend reversal. The right triangle pattern,
whether it is ascending or descending, is one
that most often indicates the continuation of
The ascending triangle is a continuation
pattern that indicates accumulations with
bullish, uptrending prices on a price chart.
Its characteristics are a horizontal ranging
of prices forming two or more almost equal
peaks that can be connected by a straight,
horizontal line. Usually, an equal number of
troughs form at ascending price levels that can
also be connected by a straight angular line
forming a triangle pattern. If the beginning
of the trendline is connected to the horizontal
line by a perpendicular one, a right triangle
is the result.
This is a robust formation that isnít relegated
to any particular trend duration. The upper
horizontal line forms a resistance level that
is continually tested by buyers. Each failure
to break out above the resistance results in a
reaction low that is higher than the previous
low, indicating the bullishness of the continuation.
Usually, volume contracts as the trading
range decreases with a surge of activity when
the resistance level is actually breached.
As usual in technical analysis, the resistance
level becomes a support level for the rising
prices when the breakout occurs. The daily
chart of Tanger Factory Outlet Centers in
Figure 1 displays an ascending triangle from
May 2012 to August 2012. Prices broke out
of this triangle in early August 2012 accompanied
by high volume.
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