Guidelines for trading by Ascending Triangles
Ascending triangles are wedge-shaped patternsthat break out most often upward. The triangle can act as a reversal orcontinuation of the existing price trend.
Busts the ascending triangle A busted ascendingtriangle occurs when price breaks out in one direction, moves less than 10percent before reversing, and continues in the new direction to close above thetop or below the bottom of the triangle.
Horizontal top line Price along the top followsa horizontal trend
Up-sloping bottom line Price makes a series ofhigher valleys, following a trendline. The two trendlines converge
Price crossing Price must cross the patternfrom side to side, filling the triangle with movement. Avoid patterns with excessivewhite space in the center of the triangle
Breakout Can be in any direction, but is upwardthe majority of the time.
When searching for ascending triangles, makesure price crosses the chart pattern from side to side several times. Priceshould not be bunched up near the start nor near the end with an empty whitehole in the middle
An ascending triangle forms because ofincreasing demand at lower prices matched with selling at a constant price.
The breakout from an ascending triangle isupward 64 percent of the time based on research completed in 2011 using over1,600 ascending triangles in both bull and bear markets.
The apex of a triangle is where price tends toform a short-term peak or valley.
Measure rule
Compute the height of the formation at thestart of the
triangle. Add the result to the price of thehorizontal trend line
(upward breakout) or subtract it from the breakprice
(downward breakout). The result is the minimumprice target.
Wait for confirmation Buy the pair when pricecloses beyond the trend line.
Sell on measure rule
For short-term tradersselltrading signalsgeneratewhen pair nears the target (see
measure rule). For intermediate- and long-termtraders, hold
the pair until fundamentals or marketconditions change.
Sell on downward breakout
If you own the stock and it breaks outdownward, sell. If you
do not own it, sell it short. Should the stockpull back, that is
another opportunity to sell, sell short, or addto your short
position.