Symmetrical-Triangle Technical Formation

Symmetrical triangles are formed when price fluctuations result in two consecutive descending tops and two consecutive ascending bottoms (See the Chart of SPDR's, NASDAQ: SPY). Drawing lines through the tops and the bottoms defines the boundaries of indecision. Symmetrical Triangles are composed of a series of price fluctuations, each smaller than its predecessor. The best symmetrical triangles are tight ones. As the price of the stock works its way out toward the apex of the triangle, the volume tends to diminish. At some point, usually within two or three months, the demand or supply side suddenly overwhelms the opposition and the breakout occurs. The breakout is often accompanied by an increase in volume. When the closing price goes beyond the side of the triangle, the breakout has been confirmed. The symmetrical triangle is called a continuation formation because most of the time the breakout will be in the same direction (up or down) as the price was headed prior to the triangle creation. The volume increases after the breakout. When the price breaks out in the opposite direction, the triangle serves as a reversal formation. As with the other triangles, if the price works its way out through the apex, the triangle loses its significance. A symmetrical triangle does not have to be perfectly symmetrical in order to be classed as such.