Technical Analysis Plain and Simple: Charting the Markets in Your Language, Second Edition

Triangles

This type of continuation pattern has converging lines of support and resistance. Some traders refer to triangles as “coils” because the trading action gets tighter and tighter until the market breaks out with great force. What is happening is that both the bulls and the bears are becoming more and more unsure about the market. They buy and sell sooner, so the market moves in smaller wiggles. Uncertainty builds and tensions increase as all participants wait for the next clues of market direction. When the market finally breaks free from the coil, pent–up supply or demand is released and the market springs lower or higher, respectively.

Again, the breakout usually, but not always, occurs in the direction of the original trend. The triangle ...