Wednesday, April 24, 2013

Sleeping Triangle: An Research and Findings by Sangamesh.K.S Part 1

Sleeping Triangles
The name may be fascinating, interesting, curious sometimes weird. The main myth with this pattern has stimulated my need towards understanding pattern at a higher level.  When we go into, what is it all about? How this pattern emerged?  We come to know there are 2 major parts in Sleeping Triangle.  One is body and other is the sleeping body of the triangle. I call it as real body and sleeping body.

Real Body
 As per my observation the real body will be lengthiest price action before breakout. The real body get into new resistance. It will touch the higher price, the price action of the real body will be very high and sometimes it take a short time duration (it may be formed within couple of days). As the price action with real body is very high. We normally tend to see RSI and other Oscillators going to a overbought zone.

Sleeping Body
The sleeping body is the essential part which differs from a regular triangle. The price action will never tend touch the support (it will touch only once before giving a breakout) instead try to be at a higher level but the sentiments of the market drag the price action lower such that it from a channel.  The volume will be much lower compared to real body.
 The price action of the sleeping body can be seen sticking to the upper level. And show the sentiments to be bullish.

Premature breakouts
Sometimes we may see the price giving premature breakouts which will say the future breakout (intension of bullish/bearish breakout) and price action.

 The breakout will be formed when the price hit the support and when the support is good the price rebound which cause a breakout.
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Strategy: Trading using Sleeping Triangle   
When we see a bullish breakout it is the only level where we can buy. As the price level is low it is the best opportunity to buy at a breakout and sell at a higher high. The triangles need to be traded opposite of a triangle. In the figure above, we can see a triangle which resembles as a descending triangle.  In a descending triangle we normally place a stop loss above the trend line but here in this sleeping we need to place a stop opposite to the descending triangle

Types of Sleeping Triangle
These triangle are of 2 types namely an
·         Ascending  Sleeping Triangle(Bearish)
·         Descending Sleeping Triangle(Bullish)
An example of descending triangle forming in Tata Coffee

Descending Triangle
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