The triangle pattern is usually known as a continuation pattern. But did you know that it can also act as a bullish reversal pattern.
This is a pattern that I have often observed happen in stocks. In this article, you will learn how to spot the pattern and pick up stocks right after they start to bottom.
A triangle is not that difficult to spot. When you connect the highs and lows it should look like a triangle.
The triangle works so well as a bullish reversal bottoming pattern because it makes a higher low. The triangle also exhibits volatility contraction and thus point to us the slowing down of a bearish momentum.
Let's take a look at the chart of AAPL above. This is its 60 min chart.
As the stock bottomed, it formed a 60 min triangle. A higher low is made and the trader can take a position in the stock the moment AAPL breaks above the triangle.
Notice how the stock also went above its 60 min 20 MA (red line) and 50 MA (blue line) when it broke out of the triangle pattern. This is where the trend starts to change from bearish to bullish.
The 20 MA eventually cross above the 50 MA to make a bullish cross.
So how do you manage this trade?
Put a stop loss below the lows of the triangle pattern.
Ride the stock higher and sell the stock once it drops below the 60 min 50 MA. Often times you can get a good reward to risk for this kind of bottom picking.
I hope you enjoyed this article and learned something from it.