How to Trade Chart Patterns A User Manual Using PRS, Vol. 1, No. 5 as an example
AZO -- Chapter One

 Symmetrical triangles in uptrends are bullish, while symmetrical triangles in downtrends are bearish. For a bullish pattern, the first point (the point farthest left or the earliest) is at the top. For a bearish pattern, the first point is at the bottom.
 The first one we'll look at is AutoZone (AZO) and it's shown with a 'symmetrical' triangle in an uptrend (which is bullish). A quick way to tell if it's a bullish triangle or a bearish triangle is to see where the first point of the triangle begins. Since the market in this example is at the very top of the pattern (the market should not go into the apex), simply getting in ASAP would be a low risk entry for a high probability trade. 'Low risk entry' because since the breakout point is immediately above and the failure point is such a short distance below, the risk to reward ratio is clearly in your favor. And for these tight little patterns, you can place your stop at a true failure point, rather than at a simple testing of the bottom of the pattern (which is often times insignificant). You'll also want to determine your minimum price target by measuring the projected move. To do this, you'll want to find the size of the pattern's base and then add that to the approximate breakout point to come up with your measured move. To find the size of the base, subtract the low of point 2 from the high of point 1.

Instead of a \$4.14 measured move from its breakout point of approx. \$67.60, it soared nearly 3 x that to close at \$79.15 on 12/5/01. From when we 'spotted' this on 11/30/01 at \$67.30, to its close on 12/5/01 at \$79.15, it was up 17.61%.

Here's another shot of that huge one-day move, without any annotations on the chart, so you can see just how spectacular of a move that really was. These kinds of 'gifts' are rare and you're truly lucky to catch something like this. And while no one could have predicted a \$12 one-day up move, the pattern did predict an upside breakout. And if you got in because of that, you would have been in for the big move that followed.

Now let's take a look at the market in the few days prior to its up move up and then we'll talk about exiting your trade.

In each of the last two days prior to its big move, there was a minor test of the downside (support). A quick yet anemic probe of the downside on weak volume is no cause for concern. And a close above support confirms the pattern's intact. (The close of those 2 days are emboldened in blue.) As a rule of thumb (assuming your personal money management rules/risk of loss are followed), a move through the 4th point (see the dotted blue horizontal line) is your failure point. In this example, it remained unchallenged. However, it should noted, that a breaking of support on gaining volume (the 4th point notwithstanding), is a cause for concern and should be considered a cue for failure and exit.