Learn / Buy and sell signals
Bullish and Bearish Triangles
Lower tops and higher bottoms that resolve in a breakout.
A Triangle forms when price swings in a narrowing range: tops getting lower and bottoms getting higher. It's a period of balance, and the direction of the breakout tells you which side won.
How a triangle forms
A triangle needs at least five columns where each X column tops lower than the one before and each O column bottoms higher than the one before. Buyers and sellers are both becoming less aggressive, and the range compresses.
Bullish Triangle
The rule: after a triangle forms, an X column rises above the top of the previous X column, giving a Double Top buy signal out of the pattern.
Bearish Triangle
The rule: after a triangle forms, an O column falls below the bottom of the previous O column, giving a Double Bottom sell signal out of the pattern.
Reading triangles
- The triangle itself is neutral. Don't anticipate the breakout; wait for the signal.
- The trend going into the triangle matters. A triangle that forms during an uptrend and breaks upward is a continuation; one that breaks against the prior trend can mark a turn.
- Because the range is tight, the first signal out of a triangle comes on a relatively small move, which keeps the distance to a logical stop short.
For education only. Nothing here is investment advice or a recommendation to buy or sell any security.