The caption on that graphic is: "Kirkpatrick and Dahlquist state that descending triangles breakout to the downside 64% of the time (2010, p. 315)."
Kirkpatrick II, C.D., & Dahlquist, J.R. (2010). Technical Analysis: The Complete Resource for Financial Market Technicians (2nd ed.). Upper Saddle River, NJ: FT Press.
iGoddard
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The DOW is forming a symmetrical triangle...
Since I posted that, it's dropped further to the edge of the lower bound. It's said a symmetrical triangle is more likely to breakout up.
isosphere
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@iGoddard, the most reliable pattern like this I've found is bullish and bearish wedges. I haven't found symmetrical triangles to indicate much other than something will happen soon; the giant dump in bitcoin recently was preceded by a symmetrical triangle (see older idea in my stream). The ascending and descending ones do seem to be correlated with their bullish and bearish indications, but I've seen less of them. I'm no expert and have had no training besides random Internet readings and my own charting.
I think nearly every wedge I've spotted has worked out, though not always as much as you'd hope. Sometimes you'd barely be up or down if you just held through it.
I think the lesson is to treat patterns as one piece of evidence, and discount them according to their reliability.
iGoddard
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@isosphere, thanks again! When I was first shown trend patterns and told by a friend they predict future behavior, I was totally skeptical. It sure looks at first a bit like woo woo. And I'm still not entirely dissuaded of that view. But as I examine trends here, there seems to be a remarkable tendency for the upper and lower bounds of trends to act as predictive upper and lower limits. So I'm starting to believe there's really something to trend analysis, that it's at least somewhat better than random guessing if not a lot better, and it might be a lot better.
Thanks for sharing your observations of likely outcomes.
I'm very skeptical that short trading is a good idea, but something more like weekly or monthly rebalancing might be better, especially when the seas get rocky and some likelihood looms for a further significant correction. Like you say, a symmetrical triangle might break in any direction, and a 'coil' sure seems to be winding up to spring.