The Failure of a Triangle

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 2

This is the first in what will be a series of posts highlighting stocks that have failed from bullish patterns and will be categorized under “When Good Charts Go Bad”. It’s important to study the chart patterns that fail so that we can avoid purchasing the stock or get out before getting burned. Today’s look is at a bullish symmetrical triangle formation that formed after a successful breakout from a flat base several weeks earlier. Often cited as a continuation pattern, the triangle formation presents a brief pause after a significant run up, before breaking out to additional gains. (as always, click the image below for a larger view)

In this particular case, Team Inc. caught my attention as a well formed triangle formation and I watched it closely for a break above the upper portion of the triangle with heavy volume. It never happened. Eventually, the stock broke below the support level of the lower portion of the triangle with heavy selling volume. However, no loss occurred because no buy signal was presented. This is a great example of why it is important to look for a breakout above resistance with large buying volume. Without the wind at your back, your chances at success will diminish significantly.

Filed under Stock Charts by Tate Dwinnell

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