Bullish Reversal Patterns/bases:

The Symmetrical Triangle

In continuation of what we discussed last week about Bullish Reversal patterns:

Today, I will discuss the second pattern/base in the list.

The Symmetrical Triangle

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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.

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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

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That’s all for today.

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