Ascending Triangle

Will anybody please explain
1)what is ascending triangle?
2) How to detect the formation of ascending triangle?
3) How safely I can take buying decision based on ascending triangle? What other parameters or indication should one look for along with ascending triangle?
4) Is there something like reverse of ascending triangle, where one can take exit decision?

T_learner

Hi T-Learner

Actually this post should have been in the "Technical Analysis " section. You already know that the ascending triangles are for "Buy" and reverse of this is for "sell".

Anyway the basics are as follows...

When the price forms two or more peaks of equal height and two or more higher troughs (lows) then the pattern formed is called ascending triangles. The equal peaks form a horizontal line. The trend line drawn through the rising troughs is an ascending trend line, which will converge towards the horizontal line. This pattern is formed when the price moves up and it becomes overbought. The selling, which emerges pulls down the price. However buying resurfaces and takes the price up again. The price is unable to break the previous resistance (recent high) and is pulled down again. But buying emerges at a higher level than before and takes the price higher again. Most recent one I came across is of BILT. Chart enclosed for reference.

Ascending triangle is very easy to spot. They are considered bullish patterns are very reliable when found in an up trend.

At some point the price breaks the resistance and is propelled to much higher levels on renewed buying interest. In other word the price “breaks out” of the ascending triangle and moves upwards. Also note that normally the volume contracts during the ascending triangle pattern and when the breakout happens volume increases. The volume increase is considered as a confirmation of breakout. You can have a look at the price breaking out the ascending triangle and the corresponding increase in volume in the enclosed chart of BILT. The concept of breakout has been discussed extensively in a separate thread with excellent posts by Amit, Saint and Ajay. Please refer this tread for more details.http://www.traderji.com/showthread.php?t=3392

So ascending triangle present good buying opportunities during the breakout. So one has to look for the breakout with good increase in volume. The price should close higher than the resistance line (top horizontal line) with increased volumes.

The reverse of the ascending triangles is the descending triangles, which are bearish patterns that breakout out in the down side. These can be noticed by their horizontal support lines and descending trend line at the top.

Regards

karthik

karthik,

good info for a newcomer like me

Hello Karthik!

Excellent Explanation and Well Supported with the Chart.

Regards

Roneeth

thanks a lot karthik,

There you go Karthik...you've gotten there...and moving on!
Good work!

Hello !

Just to Add on to Karthiks Explanation...Some bits from my Notes

The ascending triangle is a bullish formation that usually forms during an uptrend as a continuation pattern.They are bullish patterns that indicate accumulation.They are also called as Right Angle Triangle.Two or more equal highs form a horizontal line at the top. Two or more rising troughs form an ascending trend line that converges on the horizontal line as it rises. If both lines were extended right, the ascending trend line could act as the hypotenuse of a right triangle. If a perpendicular line were drawn extending down from the left end of the horizontal line, a right triangle would form.


Top Horizontal Line: At least 2 reaction highs are required to form the top horizontal line. The highs do not have to be exact, but should be within reasonable proximity of each other. There should be some distance between the highs, and a reaction low between them.

Lower Ascending Trend line: At least two reaction lows are required to form the lower ascending trend line. These reaction lows should be successively higher and there should be some distance between the lows. If a more recent reaction low is equal to or less than the previous reaction low, then the ascending triangle is not valid.

Duration: The length of the pattern can range from a few weeks to many months with the average pattern lasting from 1-3 months.

Volume: As the pattern develops, volume usually contracts. When the upside breakout occurs, there should be an expansion of volume to confirm the breakout. While volume confirmation is preferred, it is not always necessary.

Return to Breakout: A basic of technical is that resistance turns into support and vice versa. When the horizontal resistance line of the ascending triangle is broken, it turns into support. Sometimes there will be a return to this support level before the move begins in earnest.

Target: Once the breakout has occurred, the price projection is found by measuring the widest distance of the pattern and applying it to the resistance breakout.

I hope this will be helpful.

Regards

Roneeth

Wow Roneeth! Keep right there good friend! Way to go.
Hey, pretty soon you'd be taking care of your father's portfolio, to say nothing of your own!
Three Cheers.

Great stuff,Karthik..........very nice!!

Saint

Very nice Roneeth.........

Saint