The chart below of Amazon.com (AMZN) shows the Triangle continuation pattern:
Generally, when prices make significant moves, they go through a period of resting. Usually with a Triangle pattern, the price consolidation period consists of higher lows and lower lows, forming the shape of a “triangle”. When the resistance and support lines (see: Support & Resistance) begin converging, price will usually burst out of the consolidation area and resume trending in the direction that prices have been moving previously.
Triangle Breakout Buy Signal
The signal to buy is given when the resistance line is penetrated to the upside. The signal is generally stronger if prices have been in an uptrend prior to the upside breakout.
Triangle Breakout Sell Signal
A sell signal occurs when the support line is penetrated to the downside. Usually the sell signal is considered stronger if prices have been in a downtrend prior to the downside breakout.
Two other closely related variants of the Triangle pattern are the Ascending and Descending Triangle pattern; these two patterns are shown on the next page.
