Chart Pattern Analysis
one‐to‐one price projections based on the height of the pole, measured from
the symmetrical triangle breakout level. It should be noted that minimum one‐
to‐one price targets may also be obtained based on the symmetrical triangle
itself. A two‐to‐one triangle‐based price projection coinciding with a one‐to‐one
pole‐based price projection tends to result in the creation of a potentially strong
price barrier. Entries may be initiated at the breakout of the small symmetrical
triangles. See Figure 13.39.
In Figure 13.40, we see a pennant formation meeting its minimum one‐to‐one
price target based on the height of the pole, measured from the breakout level, on
the 15‐min chart of the EURUSD. Notice how price retraces once the target is met.
Again this can be attributed to profit taking at the anticipated price target level.rising and falling Wedges
Wedges are price formations that slant either upward or downward. The main
difference between wedges and triangles is that the two trendlines that cir-
cumscribe price within a wedge formation point in the same direction. A ris-
ing wedge is intrinsically bearish and a falling wedge is intrinsically bullish.
Therefore, a rising wedge is regarded as a reversal formation in an uptrend and
a continuation in a downtrend. In similar fashion, a falling wedge is regarded
as a reversal formation in a downtrend and a continuation in an uptrend. The
formation is complete once the two converging trendlines are established. No
breakout is required for pattern completion. The volume should gradually sub-
side as the wedge formation develops and increase on breakout. Once volumefigUre 13.39 An Idealized Bullish and Bearish Pennant Formation.