The Triangle Formation
Triangle formations are corrective patterns
that are bound by either converging or diverging trend lines. Triangles are
made up of 5-waves that move against the trend in a sideways fashion. These
triangles can be symmetrical, descending, ascending, or expanding.
Why is the symmetrical triangle pattern important?
Why is the symmetrical triangle pattern important?
A symmetrical triangle
pattern is relatively easy to identify. In addition, triangle patterns can be
quite reliable to trade with very low failure rates. There is a caution
concerning trading these patterns a triangle pattern can be either continuation
or reversal patterns. Typically, they are continuation patterns. To achieve the
reliability for which the triangle is well known, technical analysts advise
waiting for a clear breakout of one of the trend lines defining the triangle. Triangle
patterns are usually susceptible to definite and dependable analysis, with the
proviso that the investor must wait or a reliable, as opposed to a premature,
breakout.
Occurrence of a
Breakout:- Technical analysts pay
close attention to how long the triangle takes to develop to its apex. The
general rule is that prices should break out - clearly penetrate one of the trend
lines - somewhere between three-quarters and two-thirds of the horizontal width
of the formation. The break out, in other words, should occur well before the
pattern reaches the apex of the triangle. To take the measurement, begin by
drawing the two converging trend lines. Measure the length of the triangle from
its base to the apex. Next, plot the distance along the horizontal width of the
pattern where the breakout should take place. If prices remain within the trend
lines beyond the three-quarters point of the triangle, technical analysts will
approach the triangle with caution.
Measuring the Triangle:-
To project the minimum short-term price objective of a triangle,
an investor must wait until the price has broken through the trend line. When
the price breaks through the trend line, the investor then knows whether the pattern
is a consolidation or a reversal formation. To calculate the minimum price
objective, calculate the "height" of the formation at its widest part
- the "base" of the triangle. The height is equal determined by
projecting a vertical line from the first point of contact with the trend line
on the left of the chart to the next point of contact with the opposite trend
line. In other words, measure from the highest high point on one trend line to
the lowest low point on the opposite trend line. Both these points will be
located on the far left of the formation. Next, locate the "apex" of
the triangle (the point where the trend lines converge). Take the result of the
measurement of the height of the triangle and add it to the price marked by the
apex of the triangle if an upside breakout occurs and subtract it from the apex
price if the triangle experiences a downside breakout.
Target
Calculating:- Hight of the Triangle from point A to Point B
is 0.3540 (1.3500 -1.7040) and we have seen pattern breakdown at 1.5600 apex
and substractin the height of triangle from the apex brings to 1.2060 level on lower side in
medium to long term. On lower sdie there is multiple support seen at 1.5250; closing
basis on weekly chart below support level will confirm the down ternd to
continue and with some minore hickup as profit booking will continue the down
trend.
