Ascending Triangle Pattern?

Ascending Triangle Pattern? – An ascending triangle occurs when there are higher lows, but the highs recure at the same price level due to resistance. Ascending triangles indicate an upward bias, with a flat top and a series of higher lows

Ascending Triangle Pattern In Up Trend

Ascending triangles are generally considered bullish and are most reliable when found during an up trend. The top part of the triangle appears flat, while the bottom part of the triangle has an upward slant. Regardless of where they form, ascending triangles are bullish patterns that indicate accumulation. There are numerous instances when ascending triangles act as reversal patterns at the end of a downtrend. One of the easiest patterns in classical technical analysis is the ascending triangle reversal
pattern.

Ascending Triangle Pattern?

Ascending Trianlge

The pattern has a horizontal line which can be called a seller’s line and an upward sloping line called the buyer’s line. These lines are formed because buyers keep bidding up the buying price along the upward sloping line but meet resistance along the horizontal line, until the price finally breaks out of the horizontal line on heavy volume. The minimum target for this pattern is
the width of the ascending triangle at its widest point. A pullback bringing prices back to the horizontal line may or may not occur after the breakout.

Ascending Triangle Pattern?

Some of the important characteristics of an ascending triangle are:

  • Prices touch a high and then decline.
  • Bulls re-enter and resume buying taking the price to its earlier highs, wherefrom it once again declines and forms a higher bottom, i.e. the stock keeps on forming higher lows.
  • Thereafter, the bulls again resurface taking the price to a higher level than before.
    Price eventually breaks through the old highs and is propelled even higher as new buying comes in.
  • The breakout is generally accompanied by a marked increase in volume.

Beginning from April 2006, AL made a series of lows, after making a high of 885 in the first week of April . Most holders of this stock dumped it at that time fearing a down trend observe the volume from April to June in the lower panel.

AL then made a low of 389 on 15 June 2006. Look at the series of tops it made there after. AL broke the sellers line (1) in late July thereby reversing the down trend. Look at the increase in volume which accompanied the break of this line. AL never touched this line again and went on to make a high of 1,299 in February 2007.

The daily chart of Aegistic Logistic (AL) is a perfect example of a typical reversal of an up trend, followed first by a continuation of the down trend, and then a reversal pattern of the down trend. Triangles often form a part of some other larger and more important pattern. In this case, the ascending triangle constituted the latter half of a head and shoulders pattern and the former half of a rounding bottom pattern.

Ascending Triangle Pattern?

The failure of AL to break out on the upside from the ascending triangle formation must no doubt have disappointed the bulls. As the price moved down, this failed ascending triangle pattern marked a continuation of the down trend. The stock then developed a typical rounded bottom reversal pattern starting mid-February; the volume also followed the rounded bottom pattern. This pattern resulted in the reversal of the down trend and the start of an up trend.

What you should note are the following key characteristics:

  • A horizontal trend line drawn across the lower highs.
  • An upward sloping trend line connecting the higher lows.
  • Volume diminishes the further along we get in the formation. Heavy at the beginning of the triangle, it grows lighter at the end.
  • Good volume on breakout, i.e. on the day the price breaks above the horizontal resistance line.
  • Horizontal resistance line becomes a new support level once the price moves above it.
  • Any breach of the upward sloping higher lows line may indicate a pullback and indicate that the pattern has failed.

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Ascending Triangle Pattern?

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