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| Ascending Triangle |
What It Is:
The ascending triangle
is marked by two significant technical features. At its
top, there is a line of resistance. This is a supply line, or a price at which
sellers step into the market and unload their shares. The second aspect of the
ascending triangle is the rising trendline, which communicates the fact that
bullish investors are willing to pay higher and higher prices over time.
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How It Works:
Eventually either the bulls or bears must triumph. The more times a stock or
index tests its upper resistance line, the more likely it will eventually break
out to the upside (because the supply held by sellers is consumed over time). If
a stock tests resistance in an ascending triangle three or four times, then it
is likely that the fifth try will be successful.
When the breakout comes, it should be accompanied by stronger than normal volume. The higher the volume is in relation to normal volume, the more power the breakout has -- and the more trustworthy it is.
The measuring principle can be applied to the ascending triangle. To do so, simply take the height from the bottom of the triangle formation. Add that number to the breakout level, and you have the eventual target.
On the chart below, I have shown the ascending triangle in UTX. Note that the stock has consolidated above the rising 30-week moving average, increasing the probability of a bullish resolution.
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Why It Matters:
Many technical analysis trading strategies require the trader to buy on the
breakout. Recognizing the bullish bias of the ascending triangle gives traders a
valuable head start, alerting them to a potential trading opportunity before the
price action takes place. Therefore, being able to spot the ascending triangle
is yet another tool that swing traders can use to identify profitable
opportunities.
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