A Rare Double Intraday Triangle Example in SPY June 22

Jun 22, 2010: 2:37 PM CST

I always enjoy highlighting unusual or strange patterns from an educational perspective on the blog, and just now we have an opportunity to look at setting targets and playing two symmetrical triangles – in both directions – on the intraday SPY chart.

Let’s see the patterns and learn the suggested trading tactics:


(click for full-size image via Chart.ly)

Symmetrical Triangles represent price consolidations in expectation of an eventual range breakout that can lead to a great/simple trade set-up.

The best indicator to use is simple trendlines – hand-drawn – to highlight the compression and converging support and resistance lines as they move towards the “apex” or endpoint of the triangle.

Using classic technical analysis, traders take the height of the triangle (dotted lines) and then add those lines up or down in the direction of the price breakout from the trendlines to set a potential price target to play for on a range breakout move.

You can enhance the triangles by following other indicators, but this is the ‘bare-bones’ simple approach.

In the first triangle that formed, there really wasn’t a chance to play the range breakout, as it occurred over the weekend (China’s Yuan news) though price did gap upwards immediately into the price projection target near the $113.00 level.

Price targets are ‘hidden’ inflection points in the market that can serve as reference points such as an upper resistance level – as seen in this example.  Price fell sharply from the target.  That doesn’t always happen, but it happened in this case.

Today, a second, smaller symmetrical triangle formed which was quite clear on the intraday frame.

Price broke to the downside, this time giving traders a chance to short the breakdown though price jumped back into the triangle after an initial break.  The confirmed entry – breakdown – was as price broke the $111.00 level with a stop back above the apex (convergence) at $111.30.

The target was a move down to just under $110.00, which was hit and the market gave a quick rally and chance to exit your short position with a profit near the target.

Price has since collapsed back under $110.00, but the lesson remains in how to set targets for symmetrical triangle breaks.

I’ll discuss this more in tonight’s Idealized Trades Report.

Triangles are interesting patterns that are popular with many traders – they’re not perfect, but can lead to quick profits at times.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

3 Comments

3 Responses to “A Rare Double Intraday Triangle Example in SPY June 22”

  1. Frank Ochoa Says:

    Hi Corey!

    Using the back end of a triangle to forecast a price target has proved to be one of the most accurate target forecasting methods in my trading – at least for this pattern. This analysis works across timeframes too!

    Great stuff as always!

    Cheers!

    Frank

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