Triangle Chart Pattern and Measuring Technique

Importance of Volume

Volume should diminish as the price swings narrow within the triangle. This tendency for volume to contract is true of all consolidation patterns. But the volume should pick up noticeably at the penetration of the trend line that completes the pattern. The return move should be on light volume with heavier activity again as the trend resumes.

Two other points should be mentioned about volume. As is the case with reversal patterns, volume is more important on the upside than on the downside. An increase in volume is essential to the resumption of an uptrend in all consolidation patterns.

The second point about volume is that, even though trading activity diminishes during formation of the pattern, a close inspection of the volume usually gives a clue as to whether the heavier volume is occurring during the up moves or down-moves. In an uptrend, for example, there should be a slight tendency for volume to be heavier during the bounces and lighter on the price dips.

Measuring Technique

Triangles have measuring techniques. In the case of the symmetrical triangle, there are a couple of techniques generally used. The simplest technique is to measure the height of the vertical line at the widest part of the triangle (the base) and measure that distance from the breakout point. The distance projected from the breakout point, which is the technique I prefer.

The second method is to draw a trend line from the top of the base parallel to the lower trend line. This upper channel line then becomes the upside target in an uptrend. It is possible to arrive at a rough time target for prices to meet the upper channel line. Prices will sometimes hit the channel line at the same time the two converging lines meet at the apex.