|Right triangles are one of the more reliable patterns. Looking at daily data for QQQ you see a price pattern closely resembling a descending right triangle (Figure 1).|
|Figure 1: Daily QQQ Price And Volume. Trendlines drawn along the peaks and valleys of recent price history nearly forms a descending right triangle.|
|Graphic provided by: MetaStock.|
|Graphic provided by: Data Vendor: eSignal.|
|The price pattern is only close to a descending right triangle because the bottom trendline is not perfectly horizontal; however, with an upsloping bottom trendline the pattern forms a bearish wedge. Either way, wedge or triangle, the pattern favors bears and shorts. Does the Nasdaq composite say anything different?|
Figure 2: Daily Nasdaq Composite Price. A gap down is a strong indication that the triangle base will be the target before a reversal is seen. Currently, 1150 is in play.
The Nasdaq composite gives a clearer picture that we have descending right triangle and today's gap down only confirms a move down. Ideally prices would been coming down into the pattern. Nevertheless the odds favor shorts. VXN should confirm.
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