Triangles

Triangles are considered to be continuation patterns. In other words, they give prices a chance to consolidate and gather strength before continuing in their original direction. There are three types of triangles: Symmetrical, ascending, and descending. The symmetrical triangle is shaped equally on all sides. As prices near the right apex of the triangle, volatility decreases substantially. It is then followed by a sharp breakout signifying the direction prices will take. Ascending and descending triangles portend price movements in the general direction that predominates within each triangle. If the lows are becoming progressively higher within the triangle, it is an ascending triangle and prices can be expected to break to the upside. Or, a succession of progressively lower highs would indicate a descending triangle, from which prices could be expected to break lower. The descending triangle formation is very useful when the market has had a good rally and prices appear overvalued. The ascending triangle formation, on the other hand, works well at low levels when prices are building a base from which they will rise. Figure 11 of March '00 Copper shows a converging triangle that finally broke out into a swift move up. The ensuing move is usually roughly equal to the base of the triangle.