Hey There Income Hunters,
Here’s a secret … I use triangles to identify sideways consolidation patterns that may be close to completion and ready to breakout.
What does that mean?
Basically, trading chart triangles are an indicator that give me an edge.
Why? Because they often point to a breakout continuation of a stock’s recent performance.
I never want to waste time and money getting chopped up in a corrective trading range … so I let the pattern develop.
Once a triangle is forming, I monitor it more closely and wait for a set-up I can lean on.
Triangles are great tools because they provide a structure to trade against with clear entry points, profit targets and stop-loss levels.
I’ll run through both ascending and descending triangles and show real examples of each.
Read this graphic first …
They also happen to be an excellent company in a sector that has been undervalued and is starting to trend higher.
The fact that Morningstar has fair value 26% above the current price at $45 provides additional confidence on a continuation breakout.
Playing the Enbridge Triangle
A breakout to the upside would occur above $34.28.
Depending on when it happens, your stop would be a breakdown below the bottom, ascending trend line.
Your profit target would be the width from the lowest point of the triangle to $34.28, which is roughly $7.
Now, let’s take a look at a descending triangle, which is much like an ascending triangle, just heading the other way …
A Recent Down Trade I Made in GLD
I caught an excellent down trade in GLD in November.
After a significant rally in GLD fueled by the Fed, I noticed the Fed put stimulus on hold, telling me GLD could correct.
Sure enough, GLD traded off, broke below the 200-day moving average and formed a descending triangle.
I waited for a clear break and purchased puts on GLD.
I purchased the 173 Puts and two days later closed the position for a 90% return (or 16,000% annualized return).
Bring It Home
You want to have a tool box of technical indicators that help identify opportunities and, more importantly, help you manage your trades.
Classic patterns like triangles are extremely helpful.
I’ll share many more as real trades come along that prove the point. Maybe we’ll even start up #TechnicalTuesday!
Ping me with any questions. Until then …
Live & Trade With Passion My Friends,
Griff
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