Triangles are consolidation patterns, they coil inside the support and resistance zone, which develops potential thrust. When they give breakout or breakdown then they tend to push the prices to there targets due to the thrust developed inside the pattern.
In the above Decending Triangle, the pattern formed with perfect harmonic waves as shown in the image. When a pattern forms with harmonics, they tend to take support and resistance at the Fibonacci values. which will be against our present trade. So when do we trigger the trade in such case?
1. Check for the convergence of the harmonic patterns.
2. If the Fibonacci levels are near to support/resistance line price +/- Filter then move the trigger price just above or below the Fibonacci levels
3. If the fibonacci level is far from the support/resistance line +/- filter then watch the price action near the fibonacci levels carefully. Move the stop loss near to the fibonacci levels. If it is broken with big wide range bars or gap appers in that levels then our stop loss wont trigger and trade is intact.
4. If the price is bouncing from those levels, then the stop loss gets triggered and in this case also we exit in profits.
a) if the Fibonacci support level is taken out decisively then our trade gets triggered and we get profits.
b) If the price is reversed then our stop loss order gets triggered and we get take the profits at the targets of the harmonic pattern.
In the Chambal fert case, Fibonacci convergence has occurred at 54.80 levels, which is very near to our triangle breakdown price. So we move the trade trigger price below the Fibo level, that is at 54.50 level, and put the stoploss order at 55.90 levels. In this case price reversed from the pattern and stop loss order gets triggered and took the profits at 1st and 2nd targets of the ABCD pattern that is at 57.10 and 57.70 levels.
Chambal Fertilizer formed a Symmetric Triangle with lower volumes in 5 min time frame. Break out or break down with volume confirmation may give the target of the height of the Triangle, which is Rs. 2.50
In hourly charts the triangle has formed like a pennant to the pole. As this Triangle formed after the sustained up move with spiking volumes, it acts like a pole and pennant (continuation pattern). If breaks out happens to the triangle in 5 min time frame then the extended target would be the height of the pole which is Rs.5
