What is Dow Compression?

When a stock is making lower highs and higher lows, it is referred to as a "symmetrical triangle" pattern which is very similar to Dow Compression . This pattern is characterized by converging trendlines that form a triangle shape. The upper trendline connects the lower highs, while the lower trendline connects the higher lows.

The symmetrical triangle pattern typically indicates a period of consolidation or indecision in the market. It suggests that buyers and sellers are becoming more balanced, with neither side taking control. As the price approaches the apex of the triangle, the range between the highs and lows becomes narrower.

Traders often interpret the symmetrical triangle pattern as a potential continuation pattern. It suggests that after the consolidation phase, the price may break out in the direction of the prevailing trend before the triangle formation. However, it's important to note that symmetrical triangles can also result in trend reversals.

To trade this pattern effectively, traders often wait for a breakout above the upper trendline (indicating a bullish move) or a breakdown below the lower trendline (indicating a bearish move) before entering positions. The breakout or breakdown is typically accompanied by increased volume, further confirming the validity of the move.

It's essential to combine the symmetrical triangle pattern with other technical indicators and analysis techniques to make well-informed trading decisions. Additionally, it's crucial to consider the overall market conditions and other relevant factors that could impact the stock's price movement.