Red Tribe Article - Symmetrical Triangles
Symmetrical triangles occur regularly in cryptocurrency TA and are a commonly recognised formation. Below we can see an example of a symmetrical triangle formation for BTC/USD, which occurred between 10/01/21 and 20/01/21 (10-day period).
BTC/USD symmetrical triangle
The symmetrical triangle has a positive pre-trend, shown above with the blue line. Due to the symmetrical triangle being typical a continuation pattern, BTC was expected to break above the downwards resistance as shown below.
Symmetrical triangle - expected breakout
However this did not occur, which is why as traders it is important to wait until a breakout occurs before placing our trade.
Elliot Waves (EWs) within a symmetrical triangle
A symmetrical triangle has an (A), (B), (C), (D), (E) EW formation. When drawing the EWs (A,B,C,D,E) will all be caught by either the upwards support or resistance. From (E) the cryptocurrency will then breakout in either an upwards or downwards direction. In the example shown below, even though BTC had a positive pre-trend suggesting that an upwards breakout was highly likely, BTC broke below upwards support once the (E) EW was fulfilled.
BTC/USD (A), (B), (C), (D), (E) EW formation
Within the (A), (B), (C), (D), (E) EW symmetrical triangle formation, the cryptocurrency will see corrective EW moves only. These corrective waves (A), (B), (C) are keeping the cryptocurrency within the upwards support and downwards resistance.
Formations within a formation
Due to the triangle having (A), (B), (C) corrective waves within it, this then leads to corrective formations. For example below we can see that there is a corrective ascending channel shown with the black (A), (B), (C) EWs. In this example, the formation has occurred between the symmetrical triangles wave (A) and (B).
BTC/USD Symmetrical Triangle corrective waves
Breakout from the triangle
We can tell the future direction of the cryptocurrency from the breakout direction of the symmetrical triangle. When a breakout occurs, the cryptocurrency will retest the support or resistance which it has broken out from. In this example BTC broke below the ascending support. There was then a subsequent retest, where the cryptocurrency will attempt to break back above the trend line. This retest should then technically fail, at this point this is when a short or long position could be placed.
Below we can see BTC breaking below the ascending support, with a retest shown with the red arrow. From here BTC then fell from $35,500 USD to just under $29,000 USD.
BTC/USD symmetrical triangle breakout
Conclusion
In conclusion when trading symmetrical triangles, many traders wait for a breakout and retest to occur before placing a trade. Symmetrical triangles are typically a continuation pattern, however as demonstrated in this article that is not always the case and should not be assumed. They can be seen on all chart periods (short, medium and long term charts).
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