Ascending Triangle is a continuation Pattern of a bull run, its a common pattern and very easy to spot. This pattern can be a reversal pattern and you can spot them at the bottom of the price but it wont be as strong as when it's in a continuing uptrend. Lets look at this quick image below and see how it actually works.
Ascending Triangle have a Uptrend Support which helps us to squeeze the price against the Horizontal Resistance. Price must have at least two points touching the Horizontal Resistance and the trend must be upwards with Higher Low sequence. As the price getting squeezed closer and closer to the breakout point it can have and likely will have False Breakouts either upwards or downwards. Since ascending triangle is a continuation of a bullish run it is likely to have them upwards. When true Breakout happen we will look for confirmation, as confirmation is key in any trading strategy.
What is confirmation, we will look for at least one more candle to close above the actual price level pretty simple, no? not really every breakout has pullbacks and pullbacks happen most of the time for shakeouts and get the price a bit cheaper into actual run. Lets look at the image below of a real chart how it would look.
On image above we see:
- Previous Uptrend - What we would like to see before Ascending triangle starts to form.
- Horizontal Resistance - Should be hit at least twice and in this case we have three peeks.
- Uptrend support - Higher Low sequence was perfect in this case (but not always is).
- Volume Decline - Volume should be declining as the triangle builds an uptrend.
- Volume Spike - Volume rise preferred as it is another confirmation and shows interest in the breakout.
- Projectile Bar - Projectile bar is our target, in this case Ascending Triangle has a projectile bar from $24.5 to $21.5 as the break out happens from the breakout point to our target will be $27.50, in this case it was $27 mark.
- What are we missing so far in this chart? we are missing the retest of the breakout area, our Resistance have not officially turned into support.
- Approximate time for Triangle formation - is from 1 week into 3 to 6 month, that all depends which timeframe you are looking into.
- What is our probability - Ascending Triangle usually breakouts at 61% of triangle formation, our Upwards chance will be 77% of the time and our Downward chance of breakdown will be 23%.
- We buy at the breakout of our Horizontal line at the second candle using the first candle (horizontal resistance) as risk and our Target is the Projectile bar (you can also scale out little by little).
