Symmetrical Triangle
Tue, Apr 15A symmetrical triangle is a neutral chart pattern that presents opportunities for both long and short traders, depending on the direction in which the price breaks out.
This pattern forms in a market characterized by indecision, where buyers are trying to push prices higher but face resistance from sellers. The market experiences a pause as the price direction becomes uncertain, typically due to the balance of power between buyers and sellers.
A sequence of rallies and sell-offs occurs, with each movement becoming smaller than the previous one, causing the triangle to gradually slope upward. When these points are connected, the lines converge, creating the symmetrical triangle shape.
The chart pattern consists of at least two lower highs and two higher lows. The price range narrows progressively, forming a series of higher lows and lower highs, which reflects the increasing indecisiveness in the market.
This pattern can emerge prior to a significant news announcement that the market is anticipating, illustrating how traders are waiting for information before making their next move. Tension builds as the price consolidates towards the apex, with traders poised to act if either trend line is breached.
Ultimately, the area of indecision is resolved, and the formation typically breaks out with a surge in volume.
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