What is a 'Symmetrical Triangle'

A symmetrical triangle is a chart pattern characterized by two converging trendlines connecting a series of sequential peaks and troughs.

BREAKING DOWN 'Symmetrical Triangle'

A symmetrical triangle chart pattern represents a period of consolidation before the price is forced to breakout or breakdown. A breakdown from the lower trendline marks the start of a new bearish trend, while a breakout from the upper trendline indicates the start of a new bullish trend. The pattern is also known as a wedge chart pattern.

The price target for a breakout or breakdown from a symmetrical triangle is equal to the distance from the high and low of the earliest part of the pattern applied to the breakout price point. For example, a symmetrical triangle pattern might start at a low of $10.00 and move up to $15.00 before the price range narrows over time. A breakout from $12.00 would imply a price target of $17.00 (15 - 10 = 5 + 12 = 17).

The stop-loss for the symmetrical triangle pattern is often just below the breakout point. For example, if the aforementioned security breaks out from $12.00 on high volume, traders will often place a stop-loss just below $12.00.

Symmetrical triangles differ from ascending triangles and descending triangles in that the upper and lower trendlines are both sloping towards a center point. In contrast, ascending triangles have a horizontal upper trendline, predicting a potential breakout higher, and descending triangles have a horizontal lower trendline, predicting a potential breakdown lower. Symmetrical triangles are also similar to pennants and flags in some ways, but pennants have upward sloping trendlines rather than converging trendlines.

As with most forms of technical analysis, symmetrical triangle patterns work best in conjunction with other technical indicators and chart patterns. Traders often look for a high volume move as confirmation of a breakout and may use other technical indicators to determine how long the breakout might last. For example, the relative strength index (RSI) may be used to determine when a security has become overbought following a breakout.

Example of a Symmetrical Triangle

The following chart shows an example of a symmetrical triangle pattern.

Symmetrical Triangle Example

Chart courtesy of StockCharts.com

In this example, Northwest Bancshares Inc. is forming a symmetrical triangle that could precede a breakout. The price target for a breakout would be $19.40 (17.40 - 15.20 = 2.20 + 17.20 = 19.40). The stop-loss would be $16.40 for a breakdown or $17.20 for a breakout.

RELATED TERMS
  1. Descending Triangle

    A descending triangle is a bearish chart pattern created by drawing ...
  2. Breakout Trader

    A breakout trader is a type of trader who uses technical analysis ...
  3. Pattern

    A pattern, in finance terms, is a distinctive formation on a ...
  4. Rising Bottom

    Rising bottom is a pattern on a security's chart, considered ...
  5. Symmetrical Distribution

    Symmetrical distribution is evident when values of variables ...
  6. Pennant

    A pennant is a continuation pattern formed when there is a large ...
Related Articles
  1. Trading

    Triangle Stock Breakouts to Kick Off 2016 (GIS, SEM)

    These stocks are near triangle chart pattern breakout points, presenting trading opportunities to kick off 2016.
  2. Trading

    Continuation Patterns - Part 2

    Take a closer look at triangles, which appear in ascending, descending and symmetrical forms.
  3. Trading

    Triangle Patterns Suggest These 3 ETFs Are Headed Higher (XLV, EWJ)

    Bullish chart patterns such as the popular ascending triangle suggest that the bulls are in control. Watch these stocks: XLV,EWJ.
  4. Trading

    4 Triangle Breakouts Close At Hand

    Triangle breakouts are close at hand in these four stocks. Here's how to trade them.
  5. Investing

    Stocks with Breakout Potential (MDT, SLM)

    Stocks are moving within narrowing price bands and are poised for a breakout.
  6. Trading

    Pfizer Stock Looks Pretty Bullish for the Long Term

    After spending much of the last two months in a slow decline, shares of Pfizer have broken out of their downtrend.
  7. Trading

    Awaiting These Major Breakouts (DIS, NFLX)

    These three stocks are moving in patterns that can't last. Watch for the breakout.
  8. Trading

    Aflac Stock Is Set to Pop 10%

    An ascending triangle formation on the insurance provider's stock chart implies significant upside potential.
  9. Trading

    Russian Stocks Heading Toward Breakout Levels

    After strong rallies in 2016, Russian stock ETFs are consolidating and could break out again. (RSX, RSXJ)
RELATED FAQS
  1. What are the main differences between a Symmetrical Triangle pattern and a pennant?

    Understand the key differences between the symmetrical triangle and pennant patterns, including how they differ in formation, ... Read Answer >>
  2. What are the differences between patterns and trends?

    Learn the difference between a pattern and a trend. Explore how technical analysts use patterns and trends to identify trading ... Read Answer >>
  3. How can I determine a stock's next resistance level or target price?

    Determining where the price of an asset will stop once it has hit a new high is one of the most difficult tasks for any trader. Read Answer >>
  4. What is the Volatility Ratio formula and how is it calculated?

    Understand what the volatility ratio indicator is, how it is calculated and the way this technical indicator is used by traders ... Read Answer >>
  5. What are the differences between a bar chart and candle sticks?

    Explore the difference between bar and candlestick charts. Learn how technical analysts use charts in the analysis of supply ... Read Answer >>
Trading Center