The triangle is a useful chart pattern, especially when it occurs in the context of a trend. A triangle is formed when the price makes converging highs and/or lows. It shows that movement in the stock is becoming smaller and provides some areas to watch for a breakout. If the price moves outside the triangle, it is an indication that the price could keep moving in that breakout direction. A breakout that occurs in the same direction as the overall trend is especially noteworthy if looking to initiate a new position. A breakout in either direction is noteworthy if already in a position, as it provides context for whether to keep holding the position or to consider exiting it.
IHS Markit Ltd. stock has had a great year, up 31% in 2017. After peaking in June at $47.92, the stock has been moving in a triangle pattern. The rising trendline (bottom of the triangle) intersects near $46 – therefore, a drop below that level, especially a closing price, would signal a downside breakout. A rally above the upper trendline at $47 would imply an upside breakout. The height of the triangle at its widest point is $4.58 (it then narrows). This can be added or subtracted to the breakout point to provide an approximate target point. If a downside breakout occurs, the target is $41.42, while an upside breakout would target $51.58. (See also: Corporate Inversions: IHS and Markit Merge.)
These charts show triangle patterns, and breakouts could signal the price direction for the next few weeks. …read more
Read more here: Watch for Triangle Breakouts in These Stocks
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