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

Triangles and Rectangles

Weren’t triangles and rectangles in the last chapter on continuation patterns? If you caught that, thank you for paying attention. Triangles and rectangles are usually considered warnings of a continuation of the trend, but nothing is guaranteed. Most of the time the market does break out in the direction of the previous trend, but not always. This section is here to drive home the point that you cannot buy or sell in anticipation of a breakout. You must wait for it to happen.

Figure 10.7 shows the U.S. bond in a very clear triangle pattern. There was a small warning that the triangle would break lower, rather than continue higher, from the descending shape of the triangle itself. The lower border was flat, rather than ...