GoPro GPRO Reveals How to Trade Triangle Breakouts

One of my favorite breakout trading patterns is the Triangle, and GoPro (GPRO) just gave us three back-to-back-to-back intraday examples of this set-up.

Let’s take a look at these patterns and learn specifically how to recognize and trade this pattern.

Let’s focus on the three highlighted triangle patterns step-by-step.

First, a Triangle develops when price compresses or overlaps (bounces between) two hand-drawn trendlines.

After the compression (consolidation) develops, price tends to break out of the consolidation, allowing traders to step into the impulsive (one-directional) price action for a quick profit.

Think of the compression like the coiling of a spring and the breakout as the energy released after the ’squeeze.’

It may be easier to take a closer look at the most recent intraday “spring breakout” pattern in GPRO:

While we’re seeing two examples above, lets’ just focus on the Triangle and Breakout on March 17th.

At the beginning of March 17, price powered higher impulsively into the $ 41.00 per share target level and then buyers and sellers reached equilibrium – balance – which showed up as a triangle on the chart.

The goal is to recognize the triangle, await the breakout trigger, and jump into the market (in this case with a short-sell position) when price does break and close (5-min bar) under the lower trendline.

When filled, place the stop above the upper (falling) trendline – in this case above $ 41.20 – and play to capture the “spring” or breakout impulse as price shoots out of the consolidation trendlines.

The stop will protect you from a “Trap” outcome where an initial break occurs yet price rushes back inside the consolidation and breaks out the other side.

You can plot a target just by measuring the height of the triangle and subtracting that – in this case roughly $ 1.00 – from the breakout.

For quick math, $ 1.00 subtracted from the $ 40.80 breakdown gives us a target of $ 39.80 for which to play.

In this case, shares slightly overshot the target before reversing – off a positive divergence – from $ 39.50.

Target achieved – trade done – happy profits.

That’s the theory at least. Real-world experience will be a better teacher for you than theory.

Continue studying the popular trade set-up and apply this to your growing toolbox of trading knowledge.

Afraid to Trade Premium Content and Membership

Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

Leave a Reply

Your email address will not be published. Required fields are marked *