Wedges and Volume

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A strong preceding trend makes a stronger signal.

Triangles

There are 3 basic shapes:

Symmetrical Triangle

Symmetrical triangles form with lower highs and higher lows. Because of their shape, they can act as either a continuation or a reversal pattern. This will be signaled by the breakout. An upward breakout is a bullish signal, while a downward breakout is bearish

Ascending Triangle

An ascending triangle is formed by equal highs and higher lows. It is a bullish signal, whether encountered in an up- or down-trend. It is most often observed as a continuation pattern in an up-trend but is a strong reversal signal when witnessed in a down-trend.

Descending Triangle

Descending triangles form with equal lows and lower highs. A bearish signal, the pattern is normally observed as a continuation pattern in a down-trend but can be a powerful reversal signal when encountered in an up-trend.

Example

Cochlear Limited (Australia) depicts 2 triangles and a falling wedge.

Symmetrical triangle with lower highs and higher lows.

Ascending triangle with equal highs and higher lows. Note that volume expands at the start of the triangle, decreases as the triangle forms and expands at the breakout.

Falling wedge with lower highs and lower lows.

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