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Bullish Patterns
Symmetrical Triangles
Ascending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Bottom
Cup & Handle
Trendlines

Neutral Patterns
Symmetrical Triangles
Rectangles

Bearish Patterns
Symmetrical Triangles
Descending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Top
Trendlines

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Symmetrical Triangles

Bearish symmetrical triangles represent neutral periods of doubt and indecision. They are characterized by a series of higher lows and lower highs as the forces of supply and demand are nearly equal. Each rally is seen as a selling opportunity while each dip is met with buying. The pattern is typically large and takes several months or more than a year to form.

The best breakouts occur ½ to ¾ of the way through the pattern. A stock seems to gain energy as it is compressed into the triangle, but that energy dissipates beyond the ¾ point. It is recommended that traders abandon a stock that trades beyond the ¾ mark for very little movement is likely to occur. Volume typically diminishes as the pattern develops because traders become more and more unsure as to the stock's future direction. Then, seemingly without warning, the stock explodes out of the pattern.

Bearish symmetrical triangles appear in downtrends and typically resolve themselves to the downside. Breakdowns do not have the same volume or movement requirements as their opposite upside breaks. In fact, when stock breaks support with a massive volume surge, it often signals that of a capitulation sell-off and the stock rebounds shortly after. The best downside breaks occur on average volume followed by the stock drifting lower for a few days on increasing volume. Psychologically, when a stock first breaks support, stockholders become concerned; many of them show a loss and some sell. As the stock trades lower, concern becomes fear and the selling accelerates. Then fear becomes panic, and people sell regardless of price. This is why there typically is a delayed volume surge with breaks to the downside.

The expected price movement upon breakout is approximately equal to the widest part of the pattern.




BRCM was in a steady downtrend when it traded into this bearish symmetrical triangle. Notice how the volume dropped off towards the completion of the pattern. That's a sign that temporarily it's an equal battle between the bulls and bears and neither one is willing to step up and place a bet as to the stock's future movement. Then the stock breaks support and volume ramps up as the stock continues its move down.



TEO formed a decent size symmetrical triangle within a steady downtrend. These patterns typically resolve themselves in the direction of the trend, and that's exactly what happened. Notice how volume dried up within the pattern and then surge after the stock broke down. That's exactly what you want to see.



Pretty pattern here. Not all bearish symmetrical triangles will setup this nicely. ALSC was in a downtrend...two higher lows formed support while one lower high formed resistance. Volume dropped off within the pattern and then surged after the break down. The stock did bounce around between 9 and 10 after the break down, but as a chart pattern trader, as long as the overall market is leaning weak, that action is nothing to worry about. Give the stock room to run its course.


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