The TTG Triangle
This is a very high percentage setup that offers an excellent risk/reward ratio. If the pattern fails and you stick to the appropriate stop loss, you lose very little. But if the trade triggers, your reward can be huge.
The TTG Triangle forms when a stock pushes higher right off the opening bell to put in an “initial morning high.” You then want to see the stock pull in slightly or consolidate before eventually breaking above that initial morning high to make a new high on heavy volume.
Next, after the stock puts in its new high, you want to see the stock pull back in to re-test that initial morning high. This price area should now hold as support after it has been broken to the upside on heavy volume. After seeing this price area hold as support, you will see the stock bounce off of it but fail to get all the way back to the high of the day. It makes a lower high and then goes back down to test that initial morning high price area again.
This action creates a downtrend resistance line across the lower highs as the stock bounces off that support area that was once the initial morning high. This downtrend line coupled with the horizontal support area form a descending triangle that I like to call a TTG Triangle.
This is a high percentage pattern because you can buy in front of that support area and risk very little by setting a stop loss just below the support area. If the support breaks down you get stopped out and lose very little. But, if the support holds, and the stock breaks out and above the downtrend resistance line, you can add to your position. This is the trigger for the trade.
Typically, after the stock breaks out and above the downtrend resistance line, you will see it climb back to test the high of the day. I recommend always selling a portion of your position at the high of the day just in case the stock cannot make another new high. Lock in the profit but still hold onto some in case momentum kicks in and sees the stock make yet another new high.
If the stock makes another new high at this point, you have a much greater chance of seeing a continuation move into the afternoon session. And today, OMNT was a picture-perfect example of a TTG Triangle and we nailed it!