An ascending Triangle is a pattern that appears during an Uptrend when a Stock begins to consolidate between a flat Resistance Level and an upward-sloping Support Level. This usually happens during a binary event, when bulls and bears walk along these two lines; one is a parallel line indicating an Overhead Resistance and the other line is a slope that is the Short-Term Support. To be a valid ascending Triangle, the price must bounce twice off both the Support and Resistance Levels. These are more prevalent when the Chart Patterns are formed over long periods of time and is found to commonly occur on breakout after a 52-week high. You might have to wait weeks or months for the Chart Patterns to form. Unlike Rectangle Pattern, Triangles are continuation patterns.
Set up – Ascending triangle
In Figure 42A, you can see an Uptrend in May and June when the stock reaches an Overhead Resistance of $72 indicated by the red line. There is also a slanted upward movement of the green line on the upper half of the chart – this indicates the Short- Term Support. Since the red line indicates the Overhead Resistance and the green line indicates the Short-Term Support, this is an Intermediately-Term Uptrend. The entry point for the setup is usually the break above resistance. This can be seen on July 11th when there is a breakout of the Overhead Resistance and above- average Volume.
Set up – Descending triangle
Descending Triangle is the opposite of the Ascending Triangle. As shown in Figure 42B, if there is a sell-off in May, June and July, then the red line on the upper half of the Chart will represent Overhead Resistance and the green line will represent Long-Term Support. This means that there are less and less buyers in the market and hence you will see a Descending Triangle. If the stocks breaks out above the Volume, as shown in the Chart at $37.50, it indicates a sell signal. The sell signal occurs when the Support break above Resistance and above average Volume, at least for several days. At this point going long probably is not a good idea for this set up. The key point to note is that unlike the Rectangle Pattern, the Triangle Pattern is continuous.
It is always important to be aware of the dominant trend in the market – even if you are not looking to trade in the same direction. Price Patterns can give a glimpse of what a stock’s future may be because investors tend to react to price movements in a fairly predictable manner.
Even though Price Patterns are not infallible, they certainly put the odds in your favor. You should consider using Tradespoon tools which shows you the Chart Pattern, predicts the position of the stocks into the future and looks at the Technical and Fundamental Analysis and help you gain most from your trade.