How To Trade Triangle Patterns

Triangle pattern is useful in short term stock trading, either swing trading or day trading. There are basically 3 types of triangle patterns in technical analysis: symmetrical, ascending, and descending. They usually represent continuation patterns.

Bullish Triangle Pattern

There are 2 types of bullish triangle patterns - symmetrical and ascending as demonstrated in the following figures:

Bullish Symmetrical Triangle

1. A stock is in an uptrend

2. It forms a symmetrical triangle

3. It breaks out from the triangle and goes higher

Bullish Ascending Triangle

1. A stock is in an uptrend

2. It forms an ascending triangle

3. It breaks out from the triangle and goes higher

Let's look at some examples:

The figure below shows ENTG formed a symmetrical triangle in May. Soon after that, the stock went from 2.0 and peaked at 3.4 with a percentage gain of over 70%.

Here's another stock (FEED) that formed a symmetrical triangle in April.  The stock jumped from $2.5 a share to $8 in less than 3 months. That is a 220% gain in value.

Let's look at a stock with an ascending triangle, TSL, which is a solar company I used to swing trade pretty often. The stock doubled in value from $14 a share to $28 in one month right after it formed an ascending triangle in May.

Bearish Triangle Pattern

There are 2 types of bearish triangle patterns- symmetrical and descending as demonstrated in the following figures:

Bearish Symmetrical Triangle

1. A stock is in an downtrend

2. It forms a symmetrical triangle

3. It breaks out from the triangle and goes lower

Bearish Descending Triangle

1. A stock is in an downtrend

2. It forms a descending triangle

3. It breaks out from the triangle and goes lower

Here's an example of a descending triangle. The stock LGN formed a descending triangle pattern at the end of May. It was a declining stock and continued to drop when the pattern was forming. It declined another 20% in less than 2 weeks after the pattern was formed.