Triangle Apex Reversal
That’s the name for a little-known, but effective and useful technique for detecting reversals. It works in many markets and to be sure that we can apply it in our analyses, we tested it on the precious metals market – it proved to be very useful.
Triangle Apex Reversal Pattern
The idea is that whenever a price of a given asset (for instance gold or mining stocks) forms a triangle, its apex is the moment when we can expect some kind of a reversal. Such a triangle is created by a declining resistance line based on previous highs and a rising support line based on previous lows.
Triangle Apex Reversal in Gold Stocks
For instance, in the case of the HUI Index, a short-term reversal took place on February 9th, 2018 right at the apex of the triangle that was created by two medium-term lines.
The resistance line was based on the August 2016 high and the September 2017 high, while the support line was based on the December 2016 low and the July 2017 low. Both lines were significant, and so was the triangle based on them. This made the reversal quite likely.
Triangle Apex Reversal in Gold
Naturally, gold stocks are not the only part of the precious metals market where we can spot this important pattern. You will find an example for the gold market below.
The above chart shows that gold is likely to reverse in the first half of March 2018, likely close to Friday, March 9th. Both green lines that create the triangle are based on important medium-term highs and lows, which makes the technique based on them important as well.
Triangle Apex Reversal in Silver
Silver also provides us with a confirmation of this reversal technique’s usefulness. It ended its decline and reversed its course in the first half of December 2017, just as the apex of the triangle had suggested. The lines are more short-term-oriented than the ones that we marked on the previous charts, but they created an effective pattern anyway. The declining dashed resistance line along with the rising, solid line crossed in early December and that’s when silver bottomed.
What to Look for in the Triangle Apex Pattern
As is the case with other price formations, the more significant lines create the pattern, the more meaningful it is, and thus the more likely it is to work (there are no sure bets in any market, only bigger and smaller chances of something working). If the price extremes that constitute the triangle are important, then one can expect the technique to be meaningful and it should be taken into account. Conversely, if the triangle is created based on something rather unimportant, one shouldn’t put much weight to a reversal prediction based on it.