These patterns are so interesting. Overnight futures are now backtesting that line. Not sure if overnight futures would count for the pattern - I don't see why not though. Or maybe it'll repeat in the daytime. It's neat the way points just line up.

Thanks Steve,

That is good to know. I outlined two possible trendlines below in blue for the upper trendline of a potential triangle scenario. Is this generally what you are thinking?

On a seperate note, I was just updating my charts, (I keep about 90 index/ETF charts updated more or less on a daily basis), and I wanted to point out the relative weakness, (for a huge up day), in all of the following groups: SMH/XHB/XLF/EWZ. If this were the start of something bigger to the upside I would have expected each of these groups from the semi's right through to Brazil to have on average outperformed the QQQ's by much greater distance. However that was not the case. Now to be clear, the numbers weren't bad, (in fact the SMH's and XLF did outperform the COMP and SPX respectively as can be seen from the charts below)..they just weren't "smokin", like one would expect if we were about to take off on a 100pt SPX run to the upside.

C

Sure SSchulman,

What you are looking for are at least two, and ideally three or more, swing points that all line up. In this case, for the "neckline" of the pattern what you are looking for are several highs that line up. I have identified those points in the first chart below in green, as well as the points that correspond to the lows of the "base" in red.

Once that is done...then you can draw in your trendlines. In most cases you won't need one for the bottom of the base as that point will be a clear low. However, in this case where you have a relatively flat bottom with several lows in a similar area it can be helpful to do so...as you will be measuring the greatest distance from anyone of the lows...back up to the neckline, (in blue chart #2), and using the greatest distance to establish the "projection" to the area of the next high.

Finally, as you can see from chart #3...you then measure the greatest depth from the lows to the "neckline" and that distance then becomes your "projection". Your "projection" is then "projected" forward in the prevailing direction of the pattern...starting at the point of the pattern where the neckline is finally broken.

As you can see in this instance the exact measurements target an area just below the filling of last Thursdays gap, which happens to coincide with the last swing low, or "pivot", that was made just prior to the breakdown.

Let me know if this helps..

C