Symmetrical triangle pattern is a continuation pattern that offer breakout after the pattern is formed . If formation is perfect for this triangle pattern and trade with right entry offers good risk -rewards. The formation of pattern is depends on some factors:
- Trend line : Since this is a continuation pattern, stock needs to have a previously established trend. Without the previous established trend, this pattern would be reversal pattern. Reversal pattern has a lot of false breakout. One should be careful before trade triangle whether breakout is real or false.
- Triangle formation: For triangle formation, we need at least 4 points. 2 points on the upper line and 2 points to the lower line. In the above chart, we defined A,C,E in the lower trend line and B,D,F for upper trend line.
- Duration: Generally, Symmetrical triangle needs more than 4 weeks or more than one moth time period. If its duration is less than 3weeks period, sometimes called it pennant.
- Volume : volume is very important during the formation period. Usually volume is dry up during the formation and breakout with very strong volume.
(click to enlarge)
This pattern has 2 price target. Target 2 is max distance between point A and B. In the above graph, Target is Point H from F which is equivalent to max distance between A&B. Target 1 is point G from point F
Here we used the Ford stock for bullish triangle chart pattern and how to entry to this bullish chart pattern and when to exit this triangle chart pattern,
Entry To The Triangle Pattern Trade
This pattern entry occurred after stock broke the upper trend line with big volume. Higher the volume with very strong Green Candle at trend line break, better the performance of the symmetrical triangle pattern. In the chart, Entry is above the high of breakout bar at 14.82. First price target is at point G and second price target is H.
(click to enlarge)
EXIT 1 For Triangle Pattern:
If stock failed to move up after the break out and came back to the upper trend line a nd also closes below the upper trendline of the pattern that is a warning sign for the trade. Trader should think about the exit. The first exit should be below the breakout bar at price 14.30. if price break this point, that means breakout is not valid or stock needs more time for this breakout. Conservative trader can leave the trade after stock went down below the breakout green candlestick. Again if stock hits the upper trend line of the pattern but it’s not close below the trend line, this indicate stock is really strong and no reason to leave the trade
Exit 2 for Triangle Pattern
If stock breached the upper trend line but its not broke the lower trend line or still holding above the lower trend line, trader can still hold his position. However, if stock broke the lower trend line and closed below the trend line, trader should definitely leave the trade. This indicate continuation pattern is completely broken and stock may move down further as a reversal pattern. Exit point should be at price 13.87.