How to Profit From an Explosive Chart Formation

(by Chris Rowe)

It is called the symmetrical triangle.

The symmetrical triangle is usually a "continuation pattern." So, whatever direction the prior trend was, is most likely the direction in which the stock will break out (if the prior trend was up) or break down (if the prior trend was down).

There are two other popular triangle patterns that are powerful in their own right called the ascending triangle (typically found in uptrends) and the descending triangle (typically found in downtrends). Learn more about these chart patterns.

But the symmetrical triangle is neutral, and is found in downtrends as often as it's found in uptrends.

There are two trendlines (black lines) that form the symmetrical triangle: One sloping up, and one sloping down. (The green line represents the stock.)

To form the symmetrical triangle, we draw two converging trendlines, and each is touched twice. The upper trendline can only be drawn after the stock has made a second peak lower than the first (blue dots).

The lower trendline can only be drawn after the stock has made a second low higher than the first (red dots).

So, altogether, there are at least four reversal points.

When you draw the triangle's trendlines, use the closing prices -- NOT the intraday prices. A breakout or breakdown occurs when the stock closes above or below the trendline.

The wide left side is called the "base," and the point on the right side is called the "apex."