An ascending triangle chart pattern is commonly used in technical analysis and considered to be bullish.
The ascending triangle is a technical pattern that pops up often signifying a continuation of the existing trend-line if it manages to break out of the ascending triangle. In this video I analyze the ascending triangle breakout in SPY and QQQ and how also not to draw an ascending triangle pattern, as well as key target areas for where the chart pattern can go to.
Here are the key characteristics of an ascending triangle:
- Shape: It forms a triangular pattern with a flat layer of resistance above and an ascending lower trendline.
- Price action: The price makes higher lows while repeatedly testing a price level level resistance (the flat upper line).
- Volume: Often decreases as the pattern forms, but increases on the breakout, but not essential that it does so, just preferred.
- Breakout: The pattern typically resolves with an upward breakout above the resistance level.
- Duration: Can form on any time frame from intraday, daily, weekly or monthly.
- Interpretation: It suggests accumulation of the asset as buyers become increasingly aggressive, eventually overcoming the resistance, after working off overbought conditions.
- Trading significance: Traders often see this as a continuation pattern in an uptrend or as a potential reversal in a downtrend.
Implications for swing trading an ascending triangle chart pattern:
- Breakout potential: Traders watch for a break above the resistance line, which often signals a strong bullish move.
- Price target: A common method to estimate the potential price move is to measure the height of the triangle at its widest point and project that distance up from the breakout point.
- Entry points: Some traders enter when the price breaks above the resistance, while others wait for a retest of the broken resistance as new support.
- Stop-loss placement: Often set below the most recent higher low or the lower trendline.
- False breakouts: Be aware that the price can sometimes briefly break above resistance before falling back. This is why some traders wait for confirmation.
- Time frame: The longer the pattern takes to form, generally the more significant the subsequent move.
- Context: Consider the overall market trend. An ascending triangle in an uptrend is typically more reliable than one in a downtrend.
Comparison to Other Chart Patterns:
Symmetrical Triangles have converging trendlines (both sloping), but like the ascending chart pattern, it can be considered a continuation pattern, but in the symmetrical triangle’s case, it can break in either direction. Descending Triangle is essentially the mirror image of ascending triangle (flat bottom, descending top) and is considered a bearish pattern, where as the ascending triangle is a bullish pattern. Rectangle has horizontal support and resistance lines, where neither will slope, and like the symmetrical triangle, it can break in any direction as well. Flag patterns are shorter-term continuation patterns and form after a sharp price move, and will have two parallel sloping lines.
So remember, ascending triangles have a clear bias, that being bullish, unlike symmetrical triangles or rectangles, and they form over longer periods than flags, but like most of these patterns, they tend to be simple to identify, once you’re familiar with it.
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