SPY’s Bullish Triangle and a Look at Previous Triangles

by Paul Costa

Bullish Pennant:  Stepping back and looking at the chart we can see that a triangle that has formed.  Analyzing this from a TA point of view, this triangle/pennant is bullish a pattern since these patterns are considered continuation patterns.  The triangle is formed after a move upwards and represents a consolidation after the move. A break of the pattern means a continuation of the trend.  SPY’s triangle has formed after a rally in the beginning in the year.   For the pattern to be valid SPY and the market will have to above 138 which would represent a break of the triangle and would confirm a new leg up.  It would represent a new leg down if it breaks to the downside. Of course this is from a TA perspective and a longer and large pattern so it is more sensitive to time and price.  But is should be something to look at and keep in mind if the market does break above it or below it.

Pervious Pennants or Triangles on SPY: Below are examples of some of the most recent triangle patterns.

Winter 2011 Triangle Bullish Breakout:  SPY rallied off its October lows only to form a triangle from November to January which broke to the upside in January starting a rally till April.

Summer 2011 Bearish Triangle Breakdown:  In the summer of 2011 SPY was in a declined as the market sold off all of August.  This triangle that formed was a bearish continuation pattern which broke to the downside.  While it didn’t cause as big as a decline as the drop in August it still was a 7% drop.

Here is a post looking at The Dollar- triangle form February to April which broke in late April and has rallied since.

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