Technical Analysis on request: Adani Power

The stock is in a correction phase and it will correct till its support at 56/41. MACD has also given a negative crossover

Trading Triangles-Introduction

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 9^th 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 ....