2010issue C0964-66
Constructing triangle, broadening, and head and shoulders patterns
These figures are built from swing highs and swing lows, then from the lines those points support. A Triangle pattern narrows toward an apex, a Broadening pattern widens, and Head and shoulders needs three peaks and a neckline before a break can complete the figure.
- Identify the swing highs and swing lows first, then draw boundary lines only through those turning points.
- A Triangle pattern converges toward an apex and is typically treated as continuation after a trend, though the same structure can be a reversal hypothesis at the end of a downtrend.
- A Broadening pattern is an inverted, widening figure. A broadening bottom is complete only when price breaks above the second higher high and holds that break.
- Head and shoulders construction needs three peaks with a higher middle head, a neckline through the troughs, and a support break to complete a top.
Swing points come first
A Triangle pattern, a Broadening pattern, and a Head and shoulders figure are each constructed from a sequence of swing highs and swing lows. The turning points are identified first. The boundary lines are drawn only through those points.
The named figure is a construction hypothesis until the stated lines and the stated break are in place. Recognition of a familiar outline is not the same as completing the figure.
Triangle pattern
A Triangle pattern is constructed from a sequence of swing highs and swing lows that converge toward an apex, so later fluctuations occupy a narrower price range than earlier ones.
An ascending triangle is drawn with a roughly horizontal resistance line across similar highs and a rising support line across higher lows. A descending triangle uses falling highs against a roughly horizontal support line. A symmetrical triangle is constructed by connecting lower highs and higher lows so both boundary lines slope toward each other.
Triangle construction is typically treated as a continuation figure after an established trend. The same converging structure can also appear at the end of a downtrend as a reversal hypothesis.
Broadening pattern
A broadening top is constructed as an inverted triangle: successively wider swings, commonly three higher peaks plus a line through two lows, rather than the narrowing range of a triangle.
A broadening bottom is the inverted counterpart of a broadening top. It is constructed from successively higher highs and lower lows after a decline. The figure is completed only when price breaks above the second higher high and holds that break.
Head and shoulders
Head and shoulders construction requires three peaks in which the middle peak, the head, is higher than the two flanking shoulders. A neckline is drawn through the intervening troughs.
A Head and shoulders top is assembled after an advance by a high-volume push to resistance, a pullback to support, a weaker return to resistance, then a break of support that marks the figure as complete.
What completes the figure
Completion is part of construction. A Head and shoulders top is not complete until support breaks. A broadening bottom is not complete until price breaks above the second higher high and holds that break.
A Triangle pattern is specified by the converging swing structure first. Whether that structure is treated as continuation or as a reversal hypothesis depends on the preceding trend.
All readings on this track · 33 readings
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