Triangles are important patterns for not only they represent a consolidation, they also provide timing for a breakout. However, the psychology of every type of triangle is different, and we would like to analyze these types of triangles, their current consolidation and the next trading plan.
Symmetrical Triangle
Chart 1: Tranmil – 7000, chart from 13/04/2009 to 8/07/2009, Symmetrical Triangle.
As indicated by A, price of Tranmil broke above the RM 0.925 resistance on the 6thof June, with strong volume, and price rallied afterward. As indicated by B, it hit a resistance at RM 1.62, and soon retreated, but found a new support at RM 1.04 level (as indicated by C). Therefore, it formed a higher-low, and we can draw an ascending line of L1. After rebounding from L1, price of Tranmil rallied again, but this time, it failed to return to the previous RM 1.62 level, but instead, it started to retreat at RM1.40 (as indicated by D), and formed a Lower-high, thus we can draw the L2 line.
As shown on Chart 1, a Symmetrical Triangle is formed with a short term uptrend line and a short term downtrend line. As the consolidation goes on, the fluctuation of price within is getting narrower, and ready for a break out. The reason which causes the narrowing fluctuation of price is because the buyers and sellers are gradually coming to a consensus while both sides are waiting for a fresh lead. A Symmetrical Triangle carries no biased in terms of direction, for both L1 and L2 carries equal strength.
Since Tranmil is now getting towards the end of the Symmetrical Triangle, the breakout of the Triangle is expected soon. When the price is getting nearer to the tip of the triangle, it is getting closer to its breaking point. If price of Tranmil should break below the L1 line, that means the L2 downtrend line is dominating, and therefore, the downtrend is expected to continue. If price of Tranmil should break above the L2 line, it means that the L1 uptrend is dominating, thus the uptrend is resumed, but, breaking above the L2 line has to be confirmed with substantial volume. The L1 line should serve as the trailing stop reference, and the next resistance are seen at RM 1.40 followed by RM 1.60.
Ascending Triangle:
Chart 2: IOI corp 1961, chart from 20/02/09 to 08/07/09, Ascending Triangle.
As shown on chart2, since March, IOIcorp has been trending up above the T1 uptrend line. Recently, price of IOIcorp hit a resistance at RM 4.76 level. As indicated by A, price of IOIcorp remained resisted by the RM 4.76 despite a few attempts to break above it, forming the L1 resistance line. After resisted by the L1 line, price of IOIcorp begin falling while finding a support as indicated by B, suggesting the T1 uptrend is still intact. Therefore, forming an Ascending Triangle.
During an uptrend, if price should remain resisted a few times at the same level, it would form an Ascending Triangle, and therefore, during the consolidation of an Ascending Triangle, there is a slight upside biased for the uptrend remains intact. If price of IOIcorp should break above the L1 resistance line, with substantial volume, it would be a bullish breakout, suggesting a continuation of the T1 uptrend. However, if price of IOIcorp should break below the T1 uptrend line, it would suggest that the T1 uptrend has ended, thus investors should consider taking their profit.
Descending Triangle:
Chart 3: Uemland – 5148, chart from 18/03/09 to 8/07/09, Descending Triangle.
As shown on Chart 3, price of UEMLand retreated sharply after resisted at RM2.00 level (losing 35%). As indicated by B, it managed to rebound from RM 1.28 after being overly sold, and therefore, forming a support at around RM 1.30 level, indicated as L1.
After rebounding from L1, price of UEMLand rallied again but failed to return to the previous RM2.00 level, but instead, it formed a lower-high at RM 1.66 (as indicated by C), thus forming a T1 downtrend line. Therefore, it formed a Descending Triangle.
The psychology of a Descending Triangle is totally opposite to an Ascending Triangle. Because of the T1 downtrend line, there is a slightly bearish biased in Descending Triangle, for the downtrend remains intact.
If price of UEMLand should break below the L1 line, the T1 downtrend will continue, and the bearish biased movement is expected to continue. On the other hand, if price of UEMLand should break above the T1 line with strong volume, it would be a signal suggesting a break out of the downtrend, and the next resistance are found at RM 1.66 followed by RM 2.00.
Other counters forming Triangles:
| Code | Short Name | Sectors | Types of Triangle |
| 2739 | HUAAN | Main Board – Industrial Product | Symmetrical Triangle |
| 4723 | JAKS | Main Board – Construction | Descending Triangle |
| 3875 | MEASAT | Main Board – Training / Service | Symmetrical Triangle |
| 4715 | GENM | Main Board – Training / Service | Symmetrical Triangle |
| 2887 | LIONDIV | Main Board – Consumer | Descending Triangle |
| 3697 | OILCORP | Main Board – Training / Service | Descending Triangle |
| 8575 | SAPCRES | Main Board – Training / Service | Symmetrical Triangle |
Conclusion:
The characteristic of any Triangles is the breaking point, which gives timing of a new movement after a consolidation. Therefore, chart analysis helps investors find tune entry or exit timing, while mentally prepare for a possible breakout during the formation of triangles.
Copyright © 2009 Straits Index (M) Sdn BhdImportant Disclaimer:These content provided by Straits Index (M) Sdn Bhd is solely for education and information purposes only, and do not suggest any investment advices. All information displayed are believed to be accurate and reliable. Interpretation of the data or analysis is at the reader's own risk. Straits Index (M) Sdn Bhd reserves the rights but obligations to update, admen, or even terminate the materials. 重要声明:以上的内容由海峡指数(马)私人有限公司提供,纯粹是教育性质, 并不是任何的投资忠告。所有资料显示认为是准确和可靠的。对数据或分析的解释和用途是在于用户自己的风险。海峡指数(马)有限公司持有保留及义务更新,甚 至终止材料的权利。
Source : WinChart, Straits Index (M) Sdn Bhd http://www.straitsindex.com/
