📈 Mastering Price Action: Wedges, Triangles, and Advanced Trading Patterns (Continued)
🚀 Symmetrical Triangles in Trading: A Case Study on Ayesha Motors
Previously, we discussed triangle patterns, particularly symmetrical triangles, and their significance in identifying potential breakout opportunities. Ayesha Motors serves as a real-world example of a symmetrical triangle breakout.
📌 Key Observations from Ayesha Motors
A symmetrical triangle pattern was visible on the monthly and weekly charts.
The breakout confirmed a bullish trend, indicating a significant move ahead.
Projected target: ₹4900 (from ₹3800), reflecting a potential ₹1000 rally.
Fundamental Strength:
Strong operating income growth.
Steady margin improvement.
Low PEG ratio (0.5), indicating it is undervalued.
🔹 Lesson: Technical breakouts supported by strong fundamentals provide higher conviction trades.
🔻 Descending & Ascending Triangles: Debunking Market Myths
📌 Descending Triangle: Bearish with Exceptions
Traditional books claim that descending triangles always break down—this is not always true.
Historical Data Suggests:
70% of the time: Breakdown occurs.
30% of the time: Unexpected breakout in the opposite direction.
Target Calculation:
Measure from the first touch point inside the triangle.
Once the breakdown occurs, project this length downward.
📌 Ascending Triangle: Bullish with Variability
Books claim that ascending triangles always break out upward, but this is not guaranteed.
Historical Data Suggests:
70% of the time: Breakout upwards.
30% of the time: Breakdown instead of a rally.
Target Calculation:
Measure from inside the first touch point and project it upon breakout.
🔍 Live Market Examples of Triangle Patterns
Grasim Industries (Ascending Triangle)
Horizontal resistance line & rising support line.
Breakout confirmed, target reached.
Gujarat Gas (Descending Triangle)
Horizontal support & falling resistance.
Breakdown confirmed, nearing its target.
Hero Motocorp (Descending Triangle)
Formation just starting, indicating a potential big move ahead.
Auto stocks still strong—trend confirmation needed.
🔹 Lesson: Triangle breakouts are not guaranteed—always wait for confirmation before entering trades.
🔥 Techno-Fundamental Approach: Why IRCTC is a Long-Term Winner
📌 Fundamental Strength of IRCTC
Net Margin: 29% (Extremely high-margin business).
Operating Margin: 50%.
Strong Cash Flow Growth.
ROCE (Return on Capital Employed): Increasing consistently.
Earnings Per Share (EPS) Growth: ₹2 → ₹10.
Stock PE (Price-to-Earnings Ratio): 53 (Compared to sector, still undervalued).
📌 Technical Strength of IRCTC
Falling Wedge Breakout
Broke resistance after consolidating.
Projected upside potential: ₹780+.
🔹 Lesson: Techno-fundamental stocks—those with both strong technical patterns and solid fundamentals—offer the best long-term trading opportunities.
🔄 Understanding Wedge Patterns: Key to Identifying Reversals
📌 Wedges vs. Triangles: What’s the Difference?
Triangles: Form around a horizontal line.
Wedges: Slanted structures, resembling contracting price movement.
📈 Types of Wedge Patterns
1️⃣ Rising Wedge (Bearish Reversal)
Formation: Higher highs & higher lows.
Breakout Direction: Typically downward.
Target Calculation:
Measure the height inside the wedge and project downward upon breakdown.
2️⃣ Falling Wedge (Bullish Reversal)
Formation: Lower highs & lower lows.
Breakout Direction: Typically upward.
Target Calculation:
Measure the height inside the wedge and project upward upon breakout.
📌 Live Market Examples of Wedges
IRCTC (Falling Wedge Breakout)
Confirmed bullish breakout, target met.
Rising Wedge Breakdown (Stock XYZ)
Price fell 5% post-breakout, proving pattern effectiveness.
🔹 Lesson: Wedges provide high-probability setups for trend reversals.
📌 Final Concepts Before the Break: Rounding Patterns & Flags
📌 What’s Left to Learn?
Rounding Bottom & Rounding Top (Indicate long-term reversals).
Flags & Pennants (Short-term continuation patterns).
📌 Clarity Check Before Moving Forward
Are triangle and wedge patterns clear? ✅
Do you understand how to set targets using ATR? ✅
Do you see the power of techno-fundamental analysis? ✅
🔹 Lesson: Mastering these patterns will help traders capitalize on both short-term momentum and long-term trends.
🏆 What’s Next?
Deep dive into rounding bottoms & rounding tops.
How to trade flags & pennants effectively.
Real-world market examples & trade setups.
Stay tuned for the next section! 🚀📊
Last updated