There are three main types of triangle patterns, as shown in Figures 4.4, 4.7, and 4.8 which are symmetrical, ascending, and descending, respectively. A fourth type, known as a pennant formation, resembles the symmetrical triangle—it has two equal sides—as shown in Figure 4.5. The ascending triangles indicate an upward bias, and the descending triangles indicate a downward bias. They are used as a measuring guide for continuation price moves. The length of time, being the distance the "triangle" or congestion area takes to form, is believed to be the distance the market will move once the market "breaks out" of the triangle pattern.
FIGURE 4.4 Symmetrical Triangle i
1. Symmetrical triangles are considered consolidation patterns that occur within a trending phase. The symmetrical triangle develops when prices consolidate as the trading range narrows; the shape forms as prices compress in a coiling pattern. The highs are lower and the lows are higher, as shown in Figure 4.5. As with any time you draw a trend, you need two points of interest, such as two consecutive highs or lows. When drawing out the trend for the triangle, we look for at least four to six points of interest. The true test on determining whether a triangle
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