Symmetrical Triangles can be characterized as areas of indecision. A market pauses and future direction is questioned. Typically, the forces of supply and demand at that moment are considered nearly equal.
The Following is a Typical Symmetrical Triangle Pattern
- Attempts to push higher are quickly met by selling, while dips are seen as bargains.
- Each new lower top and higher bottom becomes more shallow than the last, taking on the shape of a sideways triangle. (It’s interesting to note that there is a tendency for volume to diminish during this period.)
- Eventually, this indecision is met with resolve and usually explodes out of this formation (often on heavy volume.)
Research has shown that symmetrical triangles overwhelmingly resolve themselves in the direction of the trend. With this in mind, symmetrical triangles (in my opinion) are great patterns to use and should be traded as continuation patterns.