Dow Jones Update

'Interesting' triangle developing in Dow Jones. When triangle formation emerge, its time to pay attention!!

Triangle is a result of converging trendlines of support and resistance. Usually, trading action gets tighter and tighter until the market breaks out with great force. Buyers and sellers find themselves in a period where they are not sure where the market is headed. Their uncertainty is marked by their actions of buying and selling sooner, making the range of the price movements increasingly tight.

Finally, when a consensus in the market is reached, this is reflected as the price breaks out of the triangle. A spike in volume on this breakout would reflects stronger consensus that the stock should move in that direction.

However, do note that this triangle formation was not accompanied by diminishing volume and hence might not result in classic triangle breakout kind of of price action. Potential false breakout remains a possibility. Traders should keep themselves abreast of updated macroeconomic condition in order to reinforce the reliability of any breakout in the near future.