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Ascending Triangle Chart Pattern

The ascending triangle chart pattern is a variation of the symmetrical triangle. This pattern signifies a possible continuation in a stock. It is most reliable when found in an uptrend.

ascending triangle 1

The ascending triangle is formed with at least two reaction highs and two reaction lows. This pattern is quite similar to the symmetrical triangle. The difference is, the highs are equal while each subsequent low is higher than the previous low.

When you draw a trendline across the high and the lows, the two trendlines will converge to form a triangle. Because of its shape, it is also known as the right angle triangle.

The shape of this pattern shows us a lot about the battle between the bulls and the bears. This pattern shows us that we should have a bullish bias. If you look at the picture of this pattern, you will notice that the upper trendline is flat while the lower trendline is rising.

What this means is that although the stock could not rise above the upper trendline(resistance), nevertheless buyers are more agressive than sellers. Thus, you will see that the buying pressure from the buyers make each subsequent low higher than the previous low.

The breakout occurs when the price penetrates the upper trendline. To have a decisive breakout, the price should not only penetrate the trendline intra day but should have a close above the trendline on the daily chart.

Other Criterias

  1. The volume should decrease as the pattern forms. As with all breakouts, the volume should be higher than average. A return to the upper trendline (now support) after the breakout is possible. When that happens, the volume should be light.
  2. This pattern can last from 1-3 months.
  3. This pattern can give us a price target. To get the price target, measure the height of the widest point(A-B) and project it upwards from the breakout point(C).

How to trade the ascending triangle chart pattern

Entry: There are two areas that you can enter. First, you can enter on the breakout of the trendline on higher than average volume. The second place you can enter is when the stock returns to the upper trendline (now support). Look for a decrease in volume on the return to the support line. You can combine this with other indicators such as a bullish reversal japanese candlestick pattern for more accuracy and extra confirmation.

Stop: You can place a stop under the lows of the triangle's base. You can also place a stop under the lows of the last major pivot low on a smaller time frame or under the lows of the breakout bar.

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