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Top Triangle/Wedge Chart Pattern


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Top Triangle/Wedge Chart Pattern


A Top Triangle/Wedge is regarded a bearish signal, indicating a possible reversal of the existing uptrend to a new downtrend.


A Top Triangle/Wedge consists of a group of designs which have the same common shape as Symmetrical Triangles, Wedges, Ascending Triangles and Descending Triangles. The distinction is that the structures grouped together as this pattern are change of state and not continuation designs. These patterns have two converging trend lines. The pattern will display two highs touching the upper trend line and two lows touching the lower trend line.

This pattern is confirmed when the price breaks downward out of the Triangle/Wedge formation to close below the reduce trend line.

top-triangle-wedge-chart-patternVolume is an important factor to consider. Typically, volume follows a reliable pattern: volume should diminish as the price swings back and forth between an increasingly narrow range of highs and lows. However, when the breakout occurs, there should be a noticeable increase in volume. If this volume picture is not clear, investors should be cautious about decisions based on this Triangle/Wedge.

Important Characteristics

Next are significant attributes for this design.

Occurrence of a Breakout

Technical analysts give close interest to just how lengthy the pattern provides to produce to its apex. The basic guideline is that costs must break out – obviously penetrate the lower trend line – someplace between three-quarters and two-thirds of the horizontal width of the development. The break out, in another words, should happen well before the pattern achieves the apex of the Triangle/Wedge. The nearer the breakout happens to the apex the less dependable the formation.

Duration of the Triangle/Wedge

This pattern is a reasonably short-term. While long-term Triangles/Wedges do form, the most reliable patterns take between one and three months to form.


Investors should notice volume reducing as the pattern advances toward the apex of the Triangle/Wedge. At breakout, nevertheless, there should be a apparent increase in volume.

Trading Considerations

Duration of the Pattern

Observe the period of the layout and its link to your trading time period. The period of the pattern is thought about to be an indicator of the period of the impact of this pattern. The longer the pattern the longer it will take for the price to reach its target. The shorter the pattern the sooner the price move. If you are thinking about a short-term trading possibility, look for a pattern with a short period. If you are considering a longer-term trading possibility, look for a pattern with a longer duration.

Target Price

The target price provides an important indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not already been achieved.

Inbound Trend

The inbound trend is an worthwhile characteristic of the design. A shallow inbound trend may suggest a period of consolidation before the price move suggested by the pattern begins. Look for an inbound trend that is longer than the duration of the pattern. A good rule of thumb is that the inbound trend must be at least two times the period of the design.

Criteria that Supports

Support and Resistance

Look for a location of support or resistance around the target price. A region of price combination or a strong Support and opposition Line at or about the target price is a strong indicator that the price will move to that point.

Moving Average

Watch for the 200 day moving average to flatten. When prices cross below the 200 day moving average (usually about two-thirds to three-quarters of the way through the pattern), the pattern is considered more reliable.


A intense volume spike on the day of the design confirmation is a strong indicator in support of the potential for this pattern. The volume spike should be significantly above the average of the volume for the duration of the pattern. In addition, the volume during the duration of the pattern should be decreasing on average.

Criteria that Refutes

No Volume Spike on Breakout

The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable.

Short Inbound Trend

An inbound trend that is significantly shorter than the pattern duration is an indication that this pattern should be considered less reliable.

Underlying Behavior

This pattern is a happen of converging trend lines of support and resistance that give this pattern its unique shape. This happens because the trading exercise gets more powerful and stronger until the market breaks out with great force. Buyers and sellers find themselves in a stage where they are not sure where the market is on course. Their anxiety is labeled by their steps of buying and providing sooner, making the range of the price motions additional and more close. As the range between the top and troughs marking the advancement of price narrows, the trend lines meet at the “apex,”.

The narrowing of the trading activity and the decreasing volume of trade mirror the indecisiveness in the market. Lastly advice or choice in the market is strike and this is shown as the price breaks out of the Triangle/Wedge. A spike in volume on this prison-breaking date reflects stronger opinion that the stock must move in that way.

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