Triangles are one of the most recognizable patterns in the market, but one of the toughest to spot as it is forming. As it forms, it provides clear price compression as well as nice clean tradable options as long as you know the rules.
As with flats, there are several different kinds of triangles, each with their unique characteristics. Learning to anticipate when and how triangles form is a key part to leveraging Elliott Wave in your trading strategy.
Learn the Ultimate Pattern Identification System here!
All triangles have five waves that have a 3-3-3-3-3 pattern and are labeled A-B-C-D-E. Symmetrical triangles point in a flat, horizontal direction and continue the trend from which the originated.
Ascending and Descending Triangles
An ascending triangle is a bullish pattern that repeatedly rejects at a high price, but continues to create higher lows until it breaks to the upside. This is often referred to as a bull pennant. This pattern also continues the trend and is labeled as a (3-3-3-3-3) structure.
A descending triangle is also labeled A-B-C-D-E with a 3-3-3-3-3 pattern. It finds support at a low price point, but continues to bounce off the low price while creating lower highs. This is also known as a bearish pennant and continues the trend to the downside.
Many of the rules and guidelines from the symmetrical triangle and include the following:
Similar to flats, triangles can sometimes extend beyond their previous waves. Expanding Triangles create high highs and lower lows, which is a rare pattern, but can easily catch traders by surprise. The expanding triangle patter continues the trend and is also a 3-3-3-3-3 structure.
Most of the rules for expanding triangles are the same as symmetrical triangles with these key differences:
Running triangles are almost identical to symmetrical triangles. The exception is that the B wave breaks over the start of the A wave, which appeared to create an expanded flat, but then contracts towards an apex. As this is a triangle, it has the five-wave 3-3-3-3-3 pattern.
To master the markets and become a successful trader, sign up now for our free Elliott Wave course and cheat sheets for beginners.