Time Limit for Triangle Resolution

There is a time limit for the resolution of the pattern, and that is the point where the two lines meet-at the apex. As a general rule, prices should break out in the direction of the prior trend some­where between two-thirds to three-quarters of the horizontal width of the triangle. That is, the distance from the vertical base on the left of the pattern to the apex at the far right. Because the two lines must meet at some point, that time distance can be measured once the two converging lines are drawn. An upside break­out is signaled by a penetration of the upper trend line. If prices remain within the triangle beyond the three-quarters point, the triangle begins to lose its potency, and usually means that prices will continue to drift out to the apex and beyond.

The triangle, therefore, provides an interesting combination of price and time. The converging trend lines give the price boundaries of the pattern, and indicate at what point the pattern has been completed and the trend resumed by the penetration of the upper trend line (in the case of an uptrend). But these trend lines also provide a time target by measuring the width of the pattern. If the width, for example, were 20 weeks long, then the break­out should take place sometime between the 13th and the 15th week.

The actual trend signal is given by a closing penetration of one of the trend lines. Sometimes a return move will occur back to the penetrated trend line after the breakout. In an uptrend, that line has become a support line. In a downtrend, the lower line becomes a resistance line once it's broken. The apex also acts as an important support or resistance level after the breakout occurs. Various penetration criteria can be applied to the breakout. A minimum penetration criterion would be a closing price outside the trend line and not just an intraday penetration.