Syndicate
Continuous Formations
As we know, the continuous formations do not represent possible changes; they actually are pauses in the present tendency.
Symmetric triangle
The formation that appears simultaneously with the diminishing of the volume of operations, it is a triangle that begins to stretch from left to right and that has, as a minimum 4 points of reference. It is possible for the tendency to keep on (a little bit after traveling three fourths of the length of the triangle. In an occasional case, there could be a return to a scarce contracting volume. If well the tendency line that goes through the triangle would act, in this case, as support in an ascending tendency or a resistance in a descending tendency. No matter the direction, the volume will recover when the tendency resumes.
The same point may also serve as a long-term support or resistance with the triangles you can use two measuring techniques to project the minimum extension of the resuming tendency. You measure the base and you draw a line of the same length from the rupture point. An alternative procedure is to draw a parallel line from the upper extreme part of the base to the lower side of the triangle.
Rectangle
This formation is also known as the fluctuation band or congestion area and it normally reflects a consolidation period before the resuming of the present tendency.
Because of this formation is very much alike to a triple peak or to a triple valley, the technical analysts usually have to revert to the contracting volume to distinguish it from them.
If in an ascending tendency the contracting volume is greater in the recovering than in the backward motions. The most probable is that it is a rectangle. In a descending tendency it is the opposite, it is probable that the formation is a rectangle if a greater volume of contracting than that of the recovering follows the fall in price. If this were not so, a triple peak or valley could be forming.
After the rupture you could calibrate the ampleness of the price variation by measuring the width of the fluctuating band and by drawing a line at that same distance above or below the rupture point.
Buying euphoria or selling climax
Sometimes, after a long period of rises or of the falling of prices, a sudden and spectacular movement occurs giving place to a sudden change. When it happens at the end of a prolonged ascending tendency, an anxiety for buying sprouts in the markets and makes the prices to rise quickly: It is called buying euphoria. If it is due to a descending tendency, it is then denominated as a selling climax and it is produced in such a quantity of sales that the prices tend to rapidly descend.
In both cases, as the contracting volume increases, the open interest diminishes (pending net contracts in the market of futures). In situations such as these, be alert, because they will happen suddenly.
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