Bullish Reversal Patterns/bases:
The Symmetrical Triangle
In continuation of what we discussed last week about Bullish Reversal patterns:
Bullish Reversal Patterns/bases: The earliest entry point for a trend follower.
Everything is cyclical. Every (or shall I say most) uptrend reverse (Bearish reversal). And so does every downtrend (Bullish Reversal). Most of these reversals are brought about by reversal bases (most take the shape of geometrical patterns and hence are named after them).
Today, I will discuss the second pattern/base in the list.
The Symmetrical Triangle
Symmetrical Triangle :
There are at least 2 clear swing highs which are lower-highs. This makes a downward-sloping resistance.
Whereas the swing lows inch up higher forming a rising trendline support.
Rising swing lows mean the failure of bears to push the prices lower, while
Declining swing highs mean the failure of bulls to push the prices higher.
There is a contraction of volatility (this pattern is therefore often called a coil).
The further the price contracts inside these 2 converging lines, the equilibrium between buyers and sellers is threatened to be disrupted more easily.
Soon (even before the price reaches the apex of the triangle), either the buyers or sellers win the battle and the price breaks out (or breaks down).
Symmetrical triangles as bullish reversal patterns are much rarer than Ascending Triangles.
(They are more common as continuation bases).
Volume signature:
Volumes should dry up from left to right on the downlegs.
The breakout must be accompanied by relatively high volumes for a higher probability of follow-through.
Breakout should come around 2/3rd of the length of the symmetrical triangle (definitely before the apex).
The nearer a breakout is to the apex, the more failure-prone the reversal.
Let's look at a few examples.
Examples:
Bluestar Weekly: Post covid reversal
Notice the high breakout volumes.
L&T Finance weekly reversal:
FSL:
IBull Housing Finance: Possible Symmetrical Triangle Reversal Base
That’s all for today.
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Sakatas “Bullish reversal” Homma.
Good tool. Bajaj Consumer, Biocon showing similar pattern