Symmetrical Triangle
A symmetrical triangle is a chart pattern characterized by two converging trend lines connecting a series of sequential peaks and troughs. The price target for a breakout or breakdown from a symmetrical triangle is equal to the distance from the high and low of the earliest part of the pattern applied to the breakout price point. The breakout or breakdown targets for a symmetrical triangle is equal to the distance between the initial high and low applied to the breakout or breakdown point. A breakout from $12 would imply a price target of $17, or $15 – $10 = $5, then + $12 = $17. The stop-loss for the symmetrical triangle pattern is often just below the breakout point. In contrast, ascending triangles have a horizontal upper trendline, predicting a potential breakout higher, and descending triangles have a horizontal lower trendline, predicting a potential breakdown lower.
What is a Symmetrical Triangle
A symmetrical triangle is a chart pattern characterized by two converging trend lines connecting a series of sequential peaks and troughs. These trend lines should be converging at a roughly equal slope. Trend lines that are converging at unequal slopes are referred to as a rising wedge, falling wedge, ascending triangle, or descending triangle.
Symmetrical Triangles Explained
A symmetrical triangle chart pattern represents a period of consolidation before the price is forced to breakout or breakdown. A breakdown from the lower trendline marks the start of a new bearish trend, while a breakout from the upper trendline indicates the start of a new bullish trend. The pattern is also known as a wedge chart pattern.
The price target for a breakout or breakdown from a symmetrical triangle is equal to the distance from the high and low of the earliest part of the pattern applied to the breakout price point. For example, a symmetrical triangle pattern might start at a low of $10 and move up to $15 before the price range narrows over time. A breakout from $12 would imply a price target of $17, or $15 – $10 = $5, then + $12 = $17.
The stop-loss for the symmetrical triangle pattern is often just below the breakout point. For example, if the aforementioned security breaks out from $12 on high volume, traders will often place a stop-loss just below $12.
Symmetrical triangles differ from ascending triangles and descending triangles in that the upper and lower trendlines are both sloping towards a center point. In contrast, ascending triangles have a horizontal upper trendline, predicting a potential breakout higher, and descending triangles have a horizontal lower trendline, predicting a potential breakdown lower. Symmetrical triangles are also similar to pennants and flags in some ways, but pennants have upward sloping trendlines rather than converging trendlines.
As with most forms of technical analysis, symmetrical triangle patterns work best in conjunction with other technical indicators and chart patterns. Traders often look for a high volume move as confirmation of a breakout and may use other technical indicators to determine how long the breakout might last. For example, the relative strength index (RSI) may be used to determine when a security has become overbought following a breakout.
Real World Example of a Symmetrical Triangle
The following chart shows an example of a symmetrical triangle pattern in Northwest Bancshares (NWBI):
Image by Sabrina Jiang © Investopedia 2021
In this example, Northwest Bancshares is forming a symmetrical triangle that could precede a breakout. The price target for a breakout would be $19.40, or $17.40 – $15.20 = $2.20, then + $17.20 = $19.40. The stop-loss would be $16.40 for a breakdown or $17.20 for a breakout.
Related terms:
Ascending Triangle and Tactics
An ascending triangle is a chart pattern used in technical analysis created by a horizontal and rising trendline. The pattern is considered a continuation pattern, with the breakout from the pattern typically occurring in the direction of the overall trend. read more
Breakdown
A breakdown is a downward move in a security's price, usually through an identified level of support, that portends further declines. read more
Breakout and Example
A breakout is the movement of the price of an asset through an identified level of support or resistance. Breakouts are used by some traders to signal a buying or selling opportunity. read more
Continuation Pattern
A continuation pattern suggests that the price trend leading into a continuation pattern will continue, in the same direction, after the pattern completes. read more
Descending Triangle and Example
A descending triangle is a bearish chart pattern created by drawing a trendline connecting a series of lower highs and one connecting a series of lows. read more
Flag
A flag is a technical charting pattern that looks like a flag on a flagpole and suggests a continuation of the current trend. read more
Pattern
A pattern, in finance terms, is a distinctive formation on a technical analysis chart resulting from the movement of security prices. read more
Peak
A peak refers to the pinnacle point of economic growth in a business cycle before the market enters into a period of contraction. read more
Pennant
A pennant is a pattern used in technical analysis described by a triangular flag shape that signals a continuation. read more
Price Target
A price target is an analyst's projection of a security's future price, one at which an analyst believes a stock is fairly valued. read more