Education: Bullish Triangle.
Posted in tonights DWA market report.
THE TRIANGLE PATTERN: EDUCATION & IDEAS
Today we wanted to review one of the basic patterns that
exist in the Point & Figure methodology, that being the
Triangle pattern.
A triangle pattern is characterized by a series of lower
tops and higher bottoms, in essence the stock becomes
pinched. The stock eventually will break out of this
pinched condition,either to the upside or downside. You do
not know which direction it will break out, so that is why
you wait for the double top buy signal or double bottom
sell signal to be given before taking action.
Typically if a stock is in an overall uptrend, it will
resolve itself to the upside (break out) out of the
triangle; and if a stock is in an overall downtrend, it
will typically resolve itself to the downside(break down).
The triangle requires a minimum of 5 columns to qualify.
Breaks out of a triangle pattern typically lead to a quick,
explosive move, therefore you take action immediately on
the breakout. This pattern is one of the more profitable
patterns, and according to Earl Davis' study on patterns,
the bullish triangle is profitable 71.4% of the time, with
an average gain of 31%, in a span of 5.4 months; the
bearish triangle is profitable 87.5% of the time, with an
average gain of 33.3%, in 2.5 months.
The triangle pattern, therefore is a great one to watch
for,especially for those who are traders. Those that play
the Traders Corner will recall the great burst seen in CREE
after breaking out of a triangle pattern. CREE is forming
a similar pattern now; plus others to recently break out of
a triangle include ANCR, GTW, NETP, and TMPW.
Example of a triangle pattern:
Supergen Inc - SUPG
35 --------------------------------------------
34 X
33 X
32 X X<--This was the action point for SUPG.
31 X O X X It broke a double top at 32 to break
30 -----B-O-X-O-X out of the triangle pattern. Notice the
29 X O X O X series of higher bottoms and lower tops.
28 X O X O
27 X O
26 X
25 --- X-----------------
24 X A
23 X O X
22 X O X
21 9 O X
20 X-O-X-------*---------
19.5 X O *
19.0 X-------*-------------
18.5 X *
18.0 X---*-----------------
17.5 * |
