In the world of technical analysis, the symmetrical triangle represents a battle between bulls and bears. Neither side gains ground while the market forms this pattern, and the result over time is lower highs and higher lows. However, the direction of the next major move can be determined following a valid breakout of the pattern.
To the right is a price chart of West Texas crude oil (WTI). Over the last year, crude oil has formed a symmetrical triangle as marked by the red and white lines. As you can see, last week the price of crude oil broke above the white line – probably caused by concerns over the Syrian war. But whatever the reason, this represents a bullish breakout and implies that the next major move should be higher.
Market technicians can also formulate a price objective after a breakout of the pattern. In doing so, they measure the widest point of the triangle and then apply it to the breakout. The green lines represent that measurement; based on the size of the base, we measure the price target as $111 on WTI. While pattern price targets are just guidelines, they can nevertheless be powerful tools for a market technician.
Copyright: marrakeshh / 123RF Stock Photo
