Symmetrical Triangles

The most common form of a Triangle is composed of a series of price fluctuations,
each of which is smaller than its predecessor, each Minor Top failing
to attain the height of the preceding rally, and each Minor Recession stopping
above the level of the preceding Bottom. The result is a sort of contracting
“Dow Line” on the chart — a sideways price area or trading range whose
Top can be more or less accurately defined by a down-slanting boundary line
and whose Bottom can be similarly bounded by an up-slanting line. This type
of Triangle is called a Symmetrical Triangle. If we wanted to make a more
accurate application of the language of geometry, we might better call it an
Acute Triangle, since it is not at all necessary that its Top and Bottom boundaries
be of equal length or, in other words, make the same angle with the  horizontal axis. However, there is a very strong tendency in these formations
to approximate the symmetrical form; so, the established name will do well
enough. This pattern is also sometimes referred to as a “Coil.”
While the process of contraction or coiling, which makes up the price
action of the Symmetrical Triangle Pattern, is going on, trading activity exhibits
a diminishing trend, irregularly perhaps, but nevertheless quite noticeably
as time goes on. The converging upper and lower boundary lines of the price
formation come together somewhere out to the right (the future in the time
sense) of the chart, at the apex of our Triangle. As prices work their way along
in narrower and narrower fluctuations toward the apex, volume ebbs to an
abnormally low daily turnover. Then, if we are dealing with a typical example,
comes the action which first suggested the name “Coil.” For suddenly and
without warning, as though a coil spring had been wound tighter and tighter
and then snapped free, prices break out of their Triangle with a notable pickup
in volume, and leap away in a strong move which tends to approximate in
extent the up or down move that preceded its formation.
There is seldom any clue given on the one chart containing the Triangle
to tell in which direction prices are going to break out of the pattern until that action finally occurs. Sometimes you can get a pretty good idea of what
is likely to happen by observing what is going on at the same time in the
charts of other stocks (which is an important topic for later discussion), but
often, there is nothing to do but wait until the market makes up its mind
which way to go. And “making up its mind” is just what the market seems
to be doing when it builds a Triangle; everything about this pattern appears
to exemplify doubt, vacillation, and stalling until finally a decision is reached.