Chapter 23
Triangles
Triangles are trading ranges and therefore channels, since they are an area of price action contained between two lines. The minimum requirement for a trading range to be called a triangle is that it has three pushes up or down. Since they have either higher lows or lower highs, or both in the case of an expanding triangle, they also have some trending behavior. Wedges are triangles that are either rising or falling. When they are just barely sloped, traders refer to them as triangles, but when the slope is greater, they usually call them wedges. A bull or bear flag can be a wedge and will usually just become a continuation pattern. Wedges can also occur at the end of a trend and form a reversal pattern. Because they behave more like flags or reversal patterns than like traditional triangles, they are discussed in those sections rather than here.
An expanding triangle is contained between two diverging lines, both of which are technically trend channel lines because the upper line is above the highs in a bull trend (higher highs) and the lower line is below the lows in a bear trend (lower lows). An oo (outside-outside) pattern, where an outside bar is followed by a larger outside bar, is a small expanding triangle. A contracting triangle is contained between two trend lines, since the market is in both a small bear trend and a small bull trend. An ii pattern is usually a small triangle on a lower time frame chart. An ascending triangle has a resistance line ...
