tessellation triangle patterns Analyzing Chart Continuation Patterns: Triangle Patterns

Analyzing Chart Continuation Patterns: Triangle Patterns http://www.contracts-for-difference.c... There are several types of patterns that look like triangles, and for the most part they are continuation signals. The triangle patterns are formed by connecting consecutive high points with a straight line, and consecutive low points with a straight line. If the lines converge to the right, they form a triangle.

As a side note, it is possible that the two lines will diverge, becoming wider and wider apart. This is called a Broadening Formation, and is generally not a good time to trade.

There are several different ways that the triangles can be shaped. If the top line is horizontal, and the bottom line comes up to meet it, this is called an ascending triangle. You will usually see this in an uptrend, and it is bullish. When the price breaks out of the triangle formation, about 2/3 to 3/4 of the way along the pattern, you should expect it to carry on upwards.

The opposite form, called a descending triangle, has a horizontal line under the price and the line over the price slopes downward. This is seen in a downtrend, and once again denotes a continuation of the trend. It is a graphical representation of a stubborn support level which eventually gives way under pressure and the price continues downwards.

The third alternative of the conventional triangles is one where the top line slopes downward and the bottom line slopes upward. This is called a symmetrical triangle. As you can see, it has no particular bias in an up or down direction. The normal outcome is that the trend continues, so this too is a continuation pattern.

There is also another type of triangle which is called a wedge. The difference with a wedge pattern is that both lines slope in the same direction, up or down, although they still converge to a point. It is usual to see a wedge pattern which slopes in the opposite direction to the trend that it is in.

For example, in an uptrend you might have a wedge pattern sloping downwards, and eventually the price would break out upwards and continue in the uptrend. Such patterns can last from one to three months before they resolve. In a downtrend, you would tend to see a wedge pattern which slopes upwards.

This is a brief summary of the different types of triangle shapes that you may see on a pricing chart, and which are considered to be continuation patterns. Of course, they are not guaranteed to be followed by a continuation of the trend, but they are considered fairly reliable, working most of the time.

At the start it was mentioned that triangles are mostly continuation patterns. The exception is the wedge pattern, which is strongly biased towards its function. This means that a bullish wedge pattern, which slopes downward, if seen in a downtrend may precede a reversal and a change to an uptrend. The strength of the wedge pattern tends to overcome the original trend.

tessellation triangle patterns Analyzing Chart Continuation Patterns: Triangle Patterns
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