At the Spike Reunion (which was exceptional) I was talking with some folks about symmetrical triangles. I thought I would do a post explaining it a little better. CM is a fundamentally sound Canadian bank that forms both large and small symmetrical triangles as part of its price behavior. Like most world banks, CM sold off in late 2008. Eventually as the good banks got separated out from the crummy ones, CM improved in price, rising from around 30 to a new high around 78 in April 2010. Instead of correcting by decline, it traded sideways between 78 and 62, eventually completing a multi-month symmetrical triangle on the weekly chart. It busted loose in late August and is now moving steadily to test the 78 highs. Symmetrical triangles typically form mid-way through a trend move, have 5 points, and usually resolve in the direction of the trend. If you’re lucky enough to find one forming, you can begin to buy at point 5 in anticipation of the break out.

If you missed the move on the weekly, CM was nice enough to form a small “Dynamic Triangle” on the daily chart. The break offered another chance to get long. Now, we’re almost ST/OB as we challenge the highs at 78. While you could take a chance and buy on a solid break of the old highs, the surer trade would be to wait for a pullback and retest. Buying on successful tests of support, and letting the short-term indicators (2-day RSI and 2-day FI) decline to oversold is the preferred and most reliable approach. CM’s 2007’s high was at 109 in 2007, so if we break the 78-80 area we should head there. If so, then buying dips and pullbacks on CM will work well.