the hAnDbook of teChniCAl AnAlysisfigUre 13.26 Symmetrical, Descending, and Expanding Triangle Formations on the
Daily Cash Settled Chart of U.S. Dollar Index.
Courtesy of Stockcharts.com
the patterns. The rising channel meets its minimum one‐to‐one downside target
price at the projection of the height of the channel, EF, from the breakout point.
GH is the projection of EF from Point G. We also see a failed descending triangle
meeting its minimum one‐to‐one upside price target based on the projection of
the height of the base, IJ, from the breakout point. KL is the projection of IJ from
Point K.
It should be noted that since two trendlines circumscribe price within a tri-
angle formation, a parallel line may also be drawn based on each trendline.
In short, two parallelograms can be created for any single triangle formation;
in other words, a single triangle formation produces two corresponding price
channels. This creates an upside and downside price target, in addition to the
minimum one‐to‐one price objective. See Figure 13.27. The symmetrical triangle
is seen circumscribing price with trendlines AB and CD. We project a parallel
line to CD from the highest peak, creating return line EF, thereby completing
a rising channel. Similarly, we may project a parallel line to AB from the low-
est trough, creating return line GH, thereby completing a falling channel. The
ascending triangle is seen circumscribing price with trendlines AB and CD. We
project a parallel line to CD from the highest peak, creating return line EF, there-
by completing a rising channel. We may project a parallel line to AB from the
lowest trough, creating return line GH, thereby completing a horizontal chan-
nel, or rectangle formation, which is a special case of a parallelogram. Finally,
the descending triangle is seen circumscribing price with trendlines AB and CD.
We project a parallel line to CD from the highest peak, creating return line EF,
thereby completing a horizontal channel or rectangle formation. We may also
project a parallel line to AB from the lowest trough, creating return line GH,
thereby completing a falling channel.
In short, each triangle formation has therefore two price targets based on its
corresponding parallelograms and a minimum one‐to‐one price target based on
the projection of the vertical height of the base from the triangle breakout level.