The next tool that can help us trade breakouts are triangles. Triangles can be spotted when the price stars its volatility and at the same time begins to consolidate. Out main task is to spot the consolidation moment at which we can catch a breakout.
There are three triangles: Ascending, descending and symmetrical.
Ascending appears when the resistance level forms it with the price that is hitting higher lows. That is a sign that a bull breakout is about to appear. The triangle occurs when seeing a price reaching a certain level traders are too unsure that the price is going to grow further, sending an asset into the selloff. On the other end traders, seeing the price falling, begin to buy, hoping for the soon-growing price.
Ascending triangles are usually the sign of the up-trend breakout.
Descending triangle is just the opposite. Traders are buying in hopes that the price is going to go up, but more of them are trying to knock is down by overselling. With the descending triangle – where support level meets the lower highs – the bears are taking over, which means that the down-trend breakout is going to occur.
When lower highs meet higher lows – that is when we meet symmetrical triangles. With them I is not nearly as easy to say which side the price is going to go. The thing is that it could go either way and in order to see who are going to win – bulls or bears we need to look at other oscillators.
So – ascending triangle means uptrend
Descending – downtrend
Symmetrical – could go either way!