Symmetrical Triangle Pattern
A symmetrical triangle is formed when prices are making lower highs and higher lows. This typically happens when market participants are not sure of a stock’s value. Buyers and sellers, find themselves in a period where they are uncertain where the market is headed. This uncertainty is reflected in their quick reactance of buying and selling, making the pattern look like an increasingly tight coil moving across the chart. Once the pattern is broken, traders, jump on to the bandwagon / follow like sheep pushing the stock’s price up, or down, as the case may be.
Symmetrical patterns are found when prices seen at the extreme ends. Prices move up and down and fluctuate within a narrow range. Therefore, it’s difficult to predict which way they will move after emerging from the symmetrical triangle pattern.
Symmetrical triangle tops are formed by a downward sloping line whose bottom can be connected by an upward sloping line. The period of sideways action is characterized by diminishing volumes.
A symmetrical triangle is similar to the doji among the candlestick pattern. The price action in a symmetrical triangle is often described as a coil or spring, which winds tighter and tighter, finally snapping free.
Symmetrical triangles are possibly the most indecisive of all technical patterns. Most break out in the direction of the original trend, but some do reverse long term trends and this possibility should always be kept in mind. Such reversal patterns offer good opportunity for a trade since prices on breakout or breakdown from these symmetrical triangles make sizable moves.