Detecting Flags, Pennants, Wedges, and Triangle Breakouts
Summary
The article distinguishes price patterns by how they form. Rectangles and contracting or expanding triangles are defined by sequences of ZigZag reversal points; flags, pennants, and wedges are described as formations made by overlapping bars. It explains how to parameterize an indicator for pattern shape, slope, formation completion, breakout entry, and target measurement.
For the rectangle and triangle family, the proposed method looks for a preceding price move, then qualifying tops and bottoms. A breakout above resistance can trigger a long entry, while the target can project the size of the preceding move. Contracting and expanding triangles differ in whether successive ZigZag segments shrink or grow. The article also describes an indicator-based tester that tracks open positions and displays equity and balance. These are rule-based detection proposals, not evidence of profitability; the author notes that other detection methods, such as regression, are possible and that the definitions are not uniquely correct.
Key ideas
- The article separates patterns formed by reversal points from formations characterized by overlapping bars.
- A horizontal formation requires multiple tops and bottoms near parallel boundaries after a preceding price move.
- Contracting and expanding triangles are distinguished by shrinking or growing successive ZigZag segments.
- A breakout can complete a pattern and provide an entry signal, with targets projected from the earlier move.
- Pattern definitions are configurable, and the article presents them as possible methods rather than definitive rules.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.