What is a 'Triangle'

A triangle is a technical chart pattern created by drawing trendlines along a converging price range. Variations of a triangle include ascending, descending and symmetrical triangles. Triangles are similar to wedges and pennants and can be powerful continuation or reversal patterns.

Technical analysts see a breakout of a triangular pattern as either bullish or bearish.

                        Image depicting chart triangles.

BREAKING DOWN 'Triangle'

Triangle patterns are aptly named because the upper and lower trendlines ultimately meet at the apex on the right side, forming a corner. Connecting the start of the upper trendline to the beginning of the lower trendline then completes the other two corners to complete the triangle. The upper trendline is formed by connecting the highs, while the lower trendline is formed by connecting the lows. One of three potential triangles can develop as the price nears the apex.

Ascending Triangle

An ascending triangle is a breakout pattern that forms when the price breaches the upper horizontal trendline with rising volume. The upper trendline must be horizontal, indicating nearly identical highs, which form a resistance level. The lower trendline is rising diagonally, indicating higher lows as buyers patiently step up their bids. Eventually, the buyers lose patience and rush into the security above the resistance price, which triggers more buying as the uptrend resumes. The upper trendline, which was formerly a resistance level, now becomes support.

Descending Triangle

A descending triangle is an inverted version of the ascending triangle and considered a breakdown pattern. The lower trendline should be horizontal, connecting near identical lows. The upper trendline declines diagonally toward the apex. The breakdown occurs when the price collapses through the lower horizontal trendline support as a downtrend resumes. The lower trendline, which was support, now becomes resistance.

Symmetrical Triangle

A symmetrical triangle is composed of a diagonal falling upper trendline and a diagonally rising lower trendline. As the price moves toward the apex, it will inevitably breach the upper trendline for a breakout and uptrend on rising prices or breach the lower trendline forming a breakdown and downtrend with falling prices.

Traders should watch for a volume spike and at least two closes beyond the trendline to confirm the break is valid and not a head fake. Symmetrical triangles tend to be continuation break patterns, meaning that they tend to break in the direction of the initial move before the triangle formed. For example, if an uptrend precedes a symmetrical triangle, traders would expect the price to break to the upside.

(To learn more about other chart patterns, see: Technical Analysis: Chart Patterns.)

RELATED TERMS
  1. Ascending Triangle

    An ascending triangle is a bullish chart pattern used in technical ...
  2. Speed Resistance Lines

    A tool in technical analysis that is used for determining potential ...
  3. Trendline

    A line that is drawn over pivot highs or under pivot lows to ...
  4. Triple Bottom

    A triple bottom is a bullish chart pattern used in technical ...
  5. Throwback

    A price move back toward the entry level of a security that has ...
  6. Andrew's Pitchfork

    Andrew’s Pitchfork is a technical indicator that uses three parallel ...
Related Articles
  1. Trading

    4 Triangle Breakouts Close At Hand

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

    Stocks Nearing Triangle Breakout Levels (TIVO)

    Triangles breakouts can provide a risk-controlled way to participate in the next wave of a stock's trend.
  3. Trading

    Watch for Triangle Breakouts in These Stocks

    These charts show triangle patterns, and breakouts could signal the price direction for the next few weeks.
  4. Trading

    Four Triangle Patterns to Keep An Eye On

    These four stocks are consolidating in triangle patterns following big moves. A breakout could kick start another significant price trend.
  5. Investing

    Stocks with Breakout Potential (MDT, SLM)

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

    Watch for These Triangle Breakouts (WY, SU)

    Watch for triangle breakouts in these stocks, which could indicate the trend direction over the next several months.
  7. Trading

    Carnival Stock in Ascending Triangle Pattern

    This bullish chart pattern suggests that Carnival shares could be set to move 15% higher.
  8. Trading

    Brazil Small Caps Set to Rally 30%

    The iShares ETF tracking Brazilian small caps has formed an ascending triangle pattern, suggesting the potential for a 30% rally.
RELATED FAQS
  1. How do I find stocks developing ascending triangle patterns?

    Learn more about the types of computer programs and software packages that can help traders scan the market for specific ... Read Answer >>
  2. What are the most common continuation candlestick patterns?

    Learn about the four most common types of continuation patterns found in candlestick charts: triangles, rectangles, flags ... Read Answer >>
  3. What is a common strategy traders implement when using the Moving Average (MA)?

    Learn about a basic moving average strategy predicated on the relationship between a security's price action and its moving ... Read Answer >>
  4. 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 >>
  5. How do I identify a stock that is under consolidation?

    Discover the three major characteristics stocks or securities exhibit when they are trading under a period of price consolidation. Read Answer >>
  6. What are the best technical indicators to complement the Exponential Moving Average ...

    Utilize additional technical indicators to complement and improve a basic trading strategy that relies on exponential moving ... Read Answer >>
Hot Definitions
  1. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  2. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  3. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  4. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  5. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
  6. Price Elasticity of Demand

    Price elasticity of demand is a measure of the change in the quantity demanded or purchased of a product in relation to its ...
Trading Center