Ascending triangles form when price creates a horizontal resistance line at the top and a rising support trendline at the bottom, indicating buyers are becoming more aggressive. Descending triangles feature a horizontal support floor with a declining resistance trendline, suggesting sellers are gaining control. Both patterns are typically continuation patterns that resolve in the direction of the prevailing trend with a measured move target equal to the triangle's height.
Ascending triangles have flat resistance and rising support, reflecting increasing buying pressure. Descending triangles have flat support and declining resistance, reflecting increasing selling pressure. Both require at least two touches on each boundary to be valid patterns. Volume typically contracts during formation and expands on the breakout. The measured move target equals the height of the triangle at its widest point, projected from the breakout. While classified as continuation patterns, both can occasionally act as reversal patterns when formed against the trend.
Enter on a close above the flat resistance of an ascending triangle with volume surge. Enter on a close below the flat support of a descending triangle with volume confirmation. Wait for a retest of the broken boundary for a lower-risk entry. Confirm with momentum indicators aligning with the breakout direction.
Target the measured move — the triangle height projected from the breakout point. Stop just inside the triangle below the last higher low (ascending) or above the last lower high (descending). Exit if the breakout fails and price returns inside the triangle with conviction. Trail stops using the rising support line for ascending triangles or declining resistance for descending.
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Ascending triangles that form during an uptrend have the highest probability of breaking out to the upside, and descending triangles during a downtrend break down most reliably. Be cautious of false breakouts — require a candle close beyond the boundary rather than just a wick. Volume is the key validator: a breakout without volume expansion often fails.
Rectangle patterns form when price trades sideways between two parallel horizontal lines — a clearly defined support and resistance. Rectangles represent a period of equilibrium where buyers and sellers are evenly matched. The pattern resolves when price breaks decisively through one of the boundaries, often continuing in the direction of the prior trend.
Broadening patterns, also called megaphone or expanding patterns, form when price creates progressively higher highs and lower lows, diverging rather than converging. These patterns reflect increasing volatility and disagreement between buyers and sellers, often appearing during periods of uncertainty or at major market turning points. Broadening patterns are among the most challenging formations to trade because they lack the contracting structure of typical chart patterns.
The rounding bottom (also known as a saucer pattern) is a long-term bullish reversal formation characterised by a gradual, U-shaped transition from a downtrend to an uptrend. The pattern reflects a slow shift in sentiment from bearish to neutral to bullish, typically forming over weeks or months. A breakout above the pattern's resistance (the left rim level) confirms the reversal.
The head and shoulders is one of the most reliable reversal patterns in technical analysis. It consists of three peaks — a higher central peak (the head) flanked by two lower peaks (the shoulders) — connected by a neckline drawn across the reaction lows. A break below the neckline confirms the reversal, with the measured target equal to the distance from the head to the neckline projected downward from the breakout point.