Yard Charts

Yard Charts technical analysis software is able to discover a Bottom Right Triangle chart pattern

Bottom Right Triangle is a YardCharts bullish reversal pattern comparable to an imaginary right triangle. It is made up of two sides joined at a 90° angle and linked by a hypotenuse. In financial technical analysis we make the following associations:

 

 

• Long side: The horizontal line drawn by uniting two or more approximately equal market highs in a given temporal segment. (See line 1, in picture A);


• Short side: The imaginary vertical line with a length that equals the distance from the horizontal line to the market low formed beneath the horizontal. (See line 2, in picture A);


• Hypotenuse: The imaginary sloping line that results from linking the market lows and corresponds to the bounces formed under the horizontal. (See line 3, in picture A).

 

 

The ideal model of Bottom Right Triangle

• There must be at least two, preferably three, bounces under the horizontal line with each corresponding to a market low. They must be in ascending order starting from the left.
• While these bounces  are being formulated, it is recommended that the down-velocity from the horizontal to the market lows be slower than the up-velocity from the lows back to the horizontal. This results in the down-bars from the horizontal to the market lows being more or equal in number than the up-bars from the same lows back to the horizontal. Not all bounces in a triangle will develop exactly as such but it helps if this characteristic materializes before the break out, as these are triangles tend to perform better on average.
• The formation of a Bottom Right Triangle is confirmed when the market breaks and closes above the horizontal line after having previously formed at least two bounces. At this point we have a buy signal, and a stop loss must be placed just below the low of the last bounce before the break out. Picture B that depicts all these properties.

 

Cases in point

Below are eight real Bottom Right triangles found by YardCharts in the past (Nasdaq, Nyse), which have successfully performed from the day of the buy alarm.
Without first hitting the stop level, the market has rallied starting from the horizontal line a distance equal at least three times the size of the stop loss (equal horizontal-last bounce low).
The relevant bounces and segments are shown in each picture. The bounce segments and colors are shown exactly as they appear on the Trading Panel of Yard Charts.