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CFD: Ideas You Can Trade -WallStreet Triangle Pattern Formed

Posted by Steven Hatzakis on Jan 20, 2014 5:32:00 PM

WallStreet: Asymetrical Triangle Formation Could lead to a Breakout of Either Side

The short term daily candle chart below shows the price of the WallStreet contract for difference (CFD) last trading at 16452 as US Markets are closed today in observance of the Federal Holiday dedicated to Martin Luther King.  

A developed triangle formation (in blue on chart) has formed as prices have consolidated somewhat into an  asymmetrical narrowing range with the last session nearly completing the tip of the triangle pattern.

Therefore, a break to either side could be more volatile than the last few candles, indicated by a decisive breaching of - either Support on the lower part (which would be bearish) - or Resistance on the upper part of the triangle (which would be bullish). 

Last time the WallStreet CFD had been covered, record highs had been reached as 2013 came to a close, and the pull-back that was anticipated still looks like a probable eventuality, although a higher-high could also be reached first.

Either way, the triangle pattern could be a turning point - even if on a very short term time-frame. The challenge will be to decide when and if a true breakout has occurred to either side, if a trade were to be made. 

Below are examples of how to trade a bullish continuation or a bearish reversal:

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 16501 with a Limit to take profit @ 16677 and a stop-loss @ 16441 Risk/Reward Summary: Limit risk = +176  points profit / (-60) Stop-loss risk = Gain to Loss ratio =  2.93

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 16402 with a Limit to take profit @ 16329 and a stop-loss @ 16444 Risk/Reward Summary:   Limit risk = +73 points profit / (-42) Stop-loss risk = Gain to Loss Ratio =  1.73

Short term chart (daily candles):

wallstreetdaily jan 20 2014

A note on CFD’s: A Contract for Difference, or CFD,is a financial contract allowing traders to potentially profit whether markets move up or down and include risk of loss. CFDs are cash-settled based on the difference in the value of an underlying asset from the time a trade is opened to the time the position is closed. A list of available CFDs that can be traded with (WWM) can be found on the WWM website.


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