A triangle is a pattern in which price trades in an increasingly narrow range. It represents a period of market congestion or consolidation, and has the same implications as trading ranges (“rectangles”), flags, and pennants.
Triangles and pennants are identical except for their length: Pennants might typically consist of approximately five to 15 bars, while triangles can span dozens of bars.
The most important aspect of triangles is that they represent market contraction (i.e., decreasing volatility), a condition typically followed by price thrusts or trends. In technical analysis parlance, there are three types of triangles: symmetrical, ascending, and descending. Symmetrical triangles consist of progressively lower highs and higher lows, so that the upper trendline of the pattern (which represents resistance) slopes downward and the lower trendline of the pattern (which represents support) slopes upward.
An ascending triangle is characterized by a rising support line that reflects progressively higher lows and a horizontal resistance line that reflects equivalent highs. A descending triangle is the opposite: It consists of a falling resistance line that reflects progressively lower highs and a horizontal support line that reflects equivalent price lows.
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