Chart Pattern Analysis
figUre 13.27 Symmetrical, Descending, and Ascending Triangle Parallelograms.In Figure 13.28, we observe a symmetrical triangle circumscribing price be-
tween trendlines FG and EI, meeting its minimum one‐to‐one price objective
with the projection of its base EF from the breakout level at G. GH is the projec-
tion of the base EF from the breakout level G. A parallel line to EI is projected
from Point X, creating a return line XK, thereby completing its corresponding
rising channel. The minimum one‐to‐one price target of this rising channel is
simply the height of the channel IJ, which is projected as KL, from the rising
channel breakout level at Point K. Hence we have three price targets associated
with the symmetrical triangle, namely the return line XK and the minimum one‐
to‐one price target level at Points H and L.
Ascending triangles are bullish formations. They are characterized by succes-
sively higher troughs with equal or matching peaks. There are regarded as con-
tinuation formations in an uptrend and reversal formations in a downtrend. Once
the two trendlines are formed, the formation is complete or valid. No breakout
is necessary for pattern completion. Volume should ideally subside as the forma-
tion develops toward the triangle apex. Volume should subsequently expand dur-
ing a breakout and decline on a retest. A breakout tends to occur when volume
tests its historical low threshold levels. A breakout is usually expected around the
two‐thirds to three‐quarters point along the width of the triangle. The formation
fails if no clear upside breakout occurs, with price trading through the apex or
breaking out toward the downside. The minimum one‐to‐one price objective is
simply the projection of the vertical height at the base of the triangle from the
upside breakout level. Further price objectives are derived from its two parallelo-
gram‐based price targets. Long entries may be initiated at the breakout level with
stoplosses placed below the resistance or below a trough within the formation.