Delta Airlines

Delta Airlines, DAL, seems to have broken out of a triangle a few weeks ago. Weekly chart below.

www.freestockcharts.com

It isn't the best triangle I've ever seen, really only two touches on the bottom and three on the top, but all that really matters is the end result. This one would have been a good buy around 11.22 and the price target would have been around 20.20 with a good TP of maybe 18.50 or so. So why am I mentioning this? I think seeing the end result of patterns is useful, also the market is closed for the weekend so a trade recommendation would be kind of useless. Triangles are the bread and butter of charting, they come in various flavors; pennants, ascending, descending, symmetrical (that's what this one is). Traditionally symmetrical triangles are considered to be continuation signals, I disagree with this. In my experience they can be reversal or continuation signals, the best way to trade them being on the breakout. This one happened to act as a reversal, bringing the price from a low of 3.60 up to the current 14.61. Of course it didn't offer a buy signal until 11.22 so the move isn't quite as impressive. Still, a 23% gain in eight weeks is pretty nice. There's probably a bit of a move left, about 4.00 or so, but I wouldn't recommend buying. Anyway, I wanted to provide an example of what a triangle can do and here one is.
If you look at the black space in the triangle, the area with no price action, you can see three main areas labeled "1", "2", and "3". As the triangle progresses the black areas should (but might not) get smaller. This is because the price action gets more and more constricted. Most chart patterns can be thought of as a buildup of pressure and a subsequent release of the pressure. An easy way to measure pressure is to look at the black space in a pattern.
One final note, the area labeled "False Break" is important. Many times you may be tempted to buy an apparent break of a pattern before a close. This is risky behavior. As you can see a buy there would have seen an almost 33% decline and would have definitely triggered a (good) stop-loss. There are some areas early on in the chart where price broke to the upside, these were too early to know that a triangle was forming but if they had happened later on would they have been a buy? No. Those breaks were only just barely above the pattern. A good break will close well above the top or bottom of the pattern; like the actual break on this one. I think 5% above the top or bottom is a good rule of thumb; i.e. if the top is 10.00 then wait for a close at or above 10.50 for an upside break.

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Do your own research before taking any position. I do not currently own any DAL and do not plan on buying any within the next 72 hours.