Triangle
A triangle is a chart pattern, depicted by drawing trendlines along a converging price range, that connotes a pause in the prevailing trend. As the price moves toward the apex, it will inevitably breach the upper trendline for a breakout and uptrend on rising prices or breach the lower trendline forming a breakdown and downtrend with falling prices. _Ascending Triangle:_ An ascending triangle is a breakout pattern that forms when the price breaches the upper horizontal trendline with rising volume. _Symmetrical Triangle:_ A symmetrical triangle is composed of a diagonal falling upper trendline and a diagonally rising lower trendline. Connecting the start of the upper trendline to the beginning of the lower trendline completes the other two corners to create the triangle.
What Is a Triangle?
A triangle is a chart pattern, depicted by drawing trendlines along a converging price range, that connotes a pause in the prevailing trend. Technical analysts categorize triangles as continuation patterns.
Understanding Triangle Patterns
Triangle patterns are aptly named because the upper and lower trendlines ultimately meet at the apex on the right side, forming a corner. Connecting the start of the upper trendline to the beginning of the lower trendline completes the other two corners to create the triangle. The upper trendline is formed by connecting the highs, while the lower trendline is formed by connecting the lows.
Triangles are similar to wedges and pennants and can be either a continuation pattern, if validated, or a powerful reversal pattern, in the event of failure. There are three potential triangle variations that can develop as price action carves out a holding pattern, namely ascending, descending, and symmetrical triangles. Technicians see a breakout, or a failure, of a triangular pattern, especially on heavy volume, as being potent bullish/bearish signals of a resumption, or reversal, of the prior trend.
Image by Julie Bang © Investopedia 2019
Type of Triangles
Traders should watch for a volume spike and at least two closes beyond the trendline to confirm the break is valid and not a head fake. Symmetrical triangles tend to be continuation break patterns, meaning that they tend to break in the direction of the initial move before the triangle formed. For example, if an uptrend precedes a symmetrical triangle, traders would expect the price to break to the upside.
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
Bear
A bear is one who thinks that market prices will soon decline, or has general market pessimism. read more
Bollinger Band® (Technical Analysis)
A Bollinger Band® is a momentum indicator used in technical analysis that depicts two standard deviations above and below a simple moving average. 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
Bull
A bull is an investor who invests in a security expecting the price will rise. Discover what bullish investors look for in stocks and other assets. read more
Candlestick
A candlestick is a type of price chart that displays the high, low, open, and closing prices of a security for a specific period and originated from Japan. 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
Crossover
A crossover is the point on a stock chart when a security and an indicator intersect. read more
Cup and Handle
A cup and handle is a bullish technical price pattern that appears in the shape of a handled cup on a price chart. read more