POINT AND FIGURE LIBRARY

The Chart Formations
Triangles

The symmetrical triangle usually has at least 5 columns. Its development is often a sign of the market waiting for some important news like the outcome of a Fed meeting, or annual results. The sellers become more reluctant to push the market down to its old lows and the buyers become more reluctant to push the market up to its old highs. Volume often diminishes. Then the news breaks. There is usually a swift move.

The upper edge of the triangle is of course similar to the bearish signal reversed. I don’t trust the triangle. In my opinion, it is the most treacherous of the point & figure signals. I have the impression that the whole market is aware that the index or share is winding itself into an ever tighter coil. When the news comes for which the market has been waiting, there is often a knee-jerk reaction which sends the market speeding away from the apex of the triangle, only for second thoughts to prevail, whereupon the market rushes all the way back up the apex and sometimes beyond. There are fewer treacherous triangles on charts which have bigger box values i.e more than 1.5%.
In A.W. Cohen’s book, the bullish triangle (one which breaks upwards) has the lowest % percentage profitability of all, and the bearish triangle (one which breaks downwards) has the fourth lowest % profitability of all. The profitability figures used in A.W. Cohen’s book suggest that the triangle is still a worthwhile formation, but I’m still wary of them. Perhaps it’s not too important. They are rare formations. They occur about 2% of the time (according to Robert Earl Davis’s study- see Dr Zieg’s book).

Next: The Triple Top

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