Trading Technical Triangles

In looking at the database this morning, I see there are a lot of triangle patterns forming on stocks right now. One of the consequences of the extreme volatility we are experiencing is investor confusion, and this is showing up in the more than 600 bearish triangle patterns and the 130 bullish triangle patterns I’m seeing. Here are a few representative names:

This is what a bullish triangle looks like. With 3M Corp (NYSE: MMM), you can see the period of consolidation and then the upside breakout. The latest pullback (column of Os) like represents a buying opportunity in this name:

Similar-looking to MMM is the chart for McDonald’s (NYSE: MCD). As you can see, the upside breakout has yet to occur:

 

On the short side, FMC (NYSE: FMC) has broken down and would be a short candidate if it could rall back to resistance. Nothing to do here, however:

 

 

Potentially Bearish

Triangles are reliable patterns which typically produce solid returns. Keep your eyes out for them; there certainly are plenty of candidates right now!

 

Podcast related to this commentary: "The Chart Whisperer: The Technical Triangle, Long & Short"