What is a Symmetrical Triangle Pattern?
A period of consolidation before the price is forced to breakout or breakdown. A breakdown from the lower trend line marks the start of a bearish trend, while a breakout from the topside indicates a bullish trend.
The symmetrical triangle is a chart pattern that is identified by its lower highs and higher lows. This pattern is indicated when two trend lines converge with the converging trend lines connecting and containing several peaks and troughs.
What does the Symmetrical Triangle Pattern Signal?
The Symmetrical Triangle once broken out of the converging trend lines, it can indicate a very strong bullish or bearish movement depending on if the breakout point was up or down. If the breakout point was up, the symmetrical triangle is signaling a bullish move upwards and if the breakout point was down it’s signaling a bearish move downwards.
Attributes
- Pattern type: Continuation or reversal
- Indication: Bullish or bearish
- Breakout Confirmation: The confirmation for this pattern is a close above or below the converging trend lines on above-average trading volume.
- Measuring: Subtract the height of the lowest low and the highest high of the pattern and then add or subtract this amount to the breakout level depending on which way the breakout moves.
- Volume: The volume declines throughout the symmetrical triangle formation, expanding on the breakout.
Trading a Symmetrical Triangle Pattern
Looking at the 1-hour time frame of PLTR (Palantir Technologies) we see a symmetrical triangle that has formed after hitting its all time high price of a little over $30. The original breakout occurred after its IPO at $10 and soared to 3x that in the matter of a month. PLTR was squeezed between an uptrend & downtrend, forming a wedge or better known as a symmetrical triangle. From here, the price broke out to the topside originally painting a bullish breakout until the bears took over and dumped the price down below both the uptrend & downtrend levels.
Looking at the 2-hour time frame of BTC (Bitcoin) there’s a not so obvious symmetrical triangle thats been formed after hitting new highs of around $41,000. Bitcoin has found itself in a critical decision moment whether it’ll breakout to the topside or downside. In the coming week it will pick a direction, but until then BTC will continue bouncing between support / resistance formed by the uptrend & downtrend.
Differences Between the Symmetrical Triangle and the Pennant Pattern
While both the Symmetrical Triangle and the Pennant pattern are continuation patterns with a good degree of reliability, there are two key differences between the two in terms of their formations. They both consistently reach higher lows and lower highs, creating two converging trend lines that form this triangle shape. However, the Pennant includes a flagpole at the start of the pattern, which isn’t there in the formation of the Symmetrical Triangle. The flagpole is created when the price suddenly pulls back or spikes up aggressively in the direction of the current trend. This move is followed up with a large spike in volume until the price eventually pauses, forming the body of the Pennant, before breaking out in the direction of the trend after a period of consolidation.
Limitations of the Symmetrical Triangle Pattern
Tread with caution when trading the symmetrical triangle, as traders may confirm their bias in their heads and get faked out on bullish and bearish signals that the triangle paints. It is recommended to draw out the symmetrical triangle and wait for a breakout before placing your trade in a certain direction, either bullish or bearish.
