Triangles are some geometrical figures which are formed on
charts. Unlike triangles having 3 point of contact, triangles in technical
charts are formed when supports/resistance and tend line to meet at a single
point.
Each triangle in charts comes with different shapes. Always
triangles are classified under continuation pattern. The world “continuation”
say that the trend is going to be same (uptrend or sideway or downtrend) and
continue to follow the previous trend.
(Technical Analysis of Financial Markets by Jhon. J. Murphy,
page no.129)
But, according to Edward and Magee in there book “Technical
Analysis of Stock Trends 9th Edition”... they classify triangles
under Reversal (Page99).
Why are triangles formed?
Its pure psychology that, a price of a stock always moves in
a trend. And a trend has two different terms those are support and resistance.
Some times the supports and resistance show some unusual variations forming a
triangle.
In every triangle
there is one constant either it is support/resistance and the price form
uptrend/downtrend forming a triangle, opposite to the constant line. (Except in
symmetrical triangle).
What are the parts of triangle?
There are many types of triangles. But, there are few things
common in them.. Those are as follows:
- Support & Resistance (SAR): Every
triangle has a support and resistance. The reason for these SAR helps you
in many ways. Sometimes when a triangle fail to make itself a triangle.
SAR plays a very important role, by showing the path of the triangles.
- Uptrend/Downtrend line: It is one
of the most important parts of a triangle because it shows the behaviour
of a price action. This uptrend line also play a very important role in
measuring the future price action of a stock.
- Breakout Up/Down: when an uptrend
line choreograph price action to break its support/resistance. The real
sentiments of market play a real role and that’s the reason why we always see
for a breakout. A breakout is always seen as a conformation of an uptrend/downtrend.
- Throwback/Pullback: These are only
seen when there are poor bullish/bearish sentiments in market. It is also
an indication of a fail-break.
- Gap: A gap is a gap in price movement of a stock. We normally see
gaps during breakouts (some times even in Fail-breaks). There are various types
of Gaps and the gap that we see during a breakout is a breakaway gaps.
- Cardle: most of people never
consider cardle an important tool. A cardle is a place where the S/R and
uptrend/downtrend line meet. It is a point of collision of two lines. But according
to few, a cardle is going to help us determine it as triangle or wedge. It
is also called apex/ point of interaction.
Types of Triangle
There are 3 types of triangle
namely..
·
Ascending
triangle
·
Descending triangle
·
Symmetrical triangle
Art of placing Targets, Stop-loss and Entry in Triangles
Ascending Triangle
Descending Triangle
To be continued ....
