Thursday, September 16, 2010

Ascending Triangle Pattern

An Ascending Triangle is considered a bullish continuation signal. It is considered a consolidation pattern prior to continuation of the uptrend.


An Ascending Continuation Triangle shows two converging trendlines. The lower trendline is rising and the upper trendline is horizontal.

This pattern occurs because the lows are moving increasingly higher but the highs are maintaining a constant price level.
The pattern will have two highs and two lows, all touching the trendlines.
This pattern is confirmed when the price breaks out of the triangle formation to close above the upper trendline.
Volume is an important factor to consider. Typically, volume follows a reliable pattern: volume should diminish as the price swings back and forth between an increasingly narrow range of highs and lows. However, when breakout occurs, there should be a noticeable increase in volume. If this volume picture is not clear, investors should be cautious about decisions based on this Triangle.


Following are important characteristics about this pattern.

Occurrence of a Breakout
Technical analysts pay close attention to how long the Triangle takes to develop to its apex. The general rule is that prices should break out - clearly penetrate one of the trendlines - somewhere between three-quarters and two-thirds of the horizontal width of the formation. The break out, in other words, should occur well before the pattern reaches the apex of the Triangle. The closer the breakout occurs to the apex the less reliable the formation.

Duration of the Triangle
The Triangle is a relatively short-term pattern. It may take between one and three months to form.

Shape of Triangle
The horizontal top trendline need not be completely horizontal but it should be close to horizontal.

Investors should see volume decreasing as the pattern progresses toward the apex of the Triangle. At breakout, however, there should be a noticeable increase in volume.


Duration of the Pattern
Consider the duration of the pattern and its relationship to your trading time horizons. The duration of the pattern is considered to be an indicator of the duration of the influence of this pattern. The longer the pattern the longer it will take for the price to move to the target price. The shorter the pattern the sooner the price move. If you are considering a short-term trading opportunity, look for a pattern with a short duration. If you are considering a longer-term trading opportunity, look for a pattern with a longer duration.

Target Price
The target price provides an important indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not already been achieved.

Inbound Trend
The inbound trend is an important characteristic of the pattern. A shallow inbound trend may indicate a period of consolidation before the price move indicated by the pattern begins. Look for an inbound trend that is longer than the duration of the pattern. A good rule of thumb is that the inbound trend should be at least two times the duration of the pattern.


Support and Resistance
Look for a region of support at the lowest low and a line of resistance at the top of the Triangle.

Moving Average
Compare prices to the 200 day Moving Average. When prices are close to or touch the 200 day Moving Average this signal is considered stronger.

A strong volume spike on the day of the pattern confirmation is a strong indicator in support of the potential for this pattern. The volume spike should be significantly above the average of the volume for the duration of the pattern. In addition, the volume during the duration of the pattern should be declining on average.


No Volume Spike on Breakout
The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable.

Short Inbound Trend
An inbound trend that is significantly shorter than the pattern duration is an indication that this pattern should be considered less reliable.


This pattern with its increasingly higher lows and constant highs indicates that buyers are more aggressive than sellers. The pattern forms because of a supply of shares is available at a fixed price. When the supply depletes, the shares quickly breakout from the top trendline and move higher. This pattern is usually found in the 4th wave of a an Elliott Wave 5 Wave Impulse Pattern.


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  2. Thank you for sharing valuable information.
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  3. Great analysis of the ascending triangle pattern! Your detailed explanation of its characteristics, including the occurrence of breakout, duration, shape, and volume considerations, provides valuable insights for traders. I appreciate the emphasis on the importance of volume patterns during the formation and breakout phases, as well as the cautionary notes regarding unreliable conditions.

    The guidance on trading this pattern, considering the duration, target price, and inbound trend, is practical and aligns well with risk management principles. The inclusion of conditions that support and work against the pattern adds another layer of depth to your analysis, especially the significance of volume spikes and the relationship with the 200-day Moving Average.

    Furthermore, your insights into wave behavior and its connection to Elliott Wave theory add a sophisticated touch to the discussion, offering a broader perspective on market dynamics.

    Incorporating educational content like this into trading strategies can undoubtedly enhance decision-making processes for investors. It's evident that your analysis is not only comprehensive but also well-structured, making it accessible for both seasoned traders and those new to technical analysis.

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  4. Hey there! Loved reading your article on the ascending triangle pattern. It's explained in such a simple and clear way that even a newbie like me can grasp it easily. I've been trying to understand different chart patterns, and your blog has been a gem in helping me navigate through them. Can't wait to read more from you! Cheers!

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  5. Wow, this article on ascending triangle patterns is really informative! I've been trying to understand more about technical analysis, and this breakdown makes it so much clearer. Thanks for sharing such valuable insights! Can't wait to apply this knowledge to my trading strategy.

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  6. Hey there! Loved your article on the ascending triangle pattern. Super informative and easy to understand, even for someone like me who's not an expert in technical analysis. The way you break down the pattern and explain its significance really helped me grasp the concept better. Keep up the great work! Can't wait to read more from you. Cheers!

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  8. Great article on the ascending triangle pattern! I love how you broke down the key points and provided clear examples. It’s fascinating to see how these patterns can predict potential breakouts in the market. Definitely learned a lot – thanks for sharing!
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