Did the Triangle Break?

Feb 25, 2008: 8:30 PM CST

Virtually every trader who uses charts has seen the recent symmetrical triangle forming in the major US Stock Market Indexes. Did we get a break-out buy signal today?

From the chart (and zoomed in image), it would seem that indeed we did have a triangle breakout buy signal today, but notice that it was not confirmed with higher volume (yet).

Notice also that there is key resistance overhead via the 50 period moving average, which is approximately 100 points away.

One thing to note is that almost everyone sees this triangle, and I assume that a majority would assume that the resolution would be to the downside. As such, there are likely to be stop-loss orders (to buy to cover) above the upper trendline, which were triggered today. Traders, anticipating a downside break, may have already entered short, only to have their positions currently underwater.

I’d like to see price cross the 50 period moving average on higher volume before getting super-bullish.

Until then, let’s wait for the market to tip its hand one way or the other before positioning ourselves too aggressively.

6 Comments

6 Responses to “Did the Triangle Break?”

  1. Stock Market » Did the Triangle Break? Says:

    […] Afraid to Trade.com Blog – Overcoming Fears wrote an interesting post today on Did the Triangle Break?Here’s a quick excerpt Virtually every trader who uses charts has seen the recent symmetrical triangle forming in the major US Stock Market Indexes. Did we get a break-out buy signal today? From the chart (and zoomed in image), it would seem that indeed we did have a triangle breakout buy signal today, but notice that it was not confirmed with higher volume (yet). Notice also that there is key resistance overhead via the 50 period moving average, which is approximately 100 points away. One thing to note is t […]

  2. Jonathan Says:

    I’d like to think that the triangle broke, but I often just watch a pattern pick a direction and trade the first decent pull back or consolidation. I’m hoping I get the opportunity with this one. One thing that should be interesting to watch is how this triangle behaves now that “everybody” is watching it. I hear it was even mentioned on CNBC!

  3. Corey Rosenbloom Says:

    Jonathan,

    I’m with you. I’m not at all surprised that the triangle appears to be breaking upwards, because everyone was expecting a downside break.

    Now that everyone is seeing the break, it wouldn’t surprise me if the triangle failed (meaning, burst out initially to the upside, fail, reverse, then eject downward).

    It throws a monkey wrench in TA when everyone’s keen on the pattern being observed.

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  6. Stock Market » Did the Triangle Break? | Blog Post Says:

    […] Royal Dutch Shell plc .com wrote an interesting post today on Did the Triangle Break? | Blog PostHere’s a quick excerptVirtually every trader who uses charts has seen the recent symmetrical triangle forming in the major US Stock Market Indexes. […]