USDINR Symmetrical Triangle Pattern Formation breakout @ 55per$ CMP is 54.15
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?
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 for 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 Calculation: - Height of the Triangle from point A
to Point B is 8.78 (48.55 – 57.33) and we are expecting a breakout above 55
per$ crossover apex, and subtracting the height of the triangle from the apex
brings to 63.78 per$ level on higher side in medium to long term. . On lower side
support is seen at 52.90 per$; closing below the same will on confirm the down
side breakdown which is not expected as the Symmetrical triangle formation is
formed after the bull trend which started from 44 per$ and after testing high
of 57.33 went under a range bound move.
On higher side we may look some
selling pressure at 57 per$ level which was height of the triangle and 58.7
per$ level where 58.7 per$ is 100% expansion of C – D from point E which is the
short term to medium term target.
