Ascending Triangle
An ascending triangle is a chart pattern used in technical analysis. It is created by price moves that allow for a horizontal line to be drawn along the swing highs and a rising trendline to be drawn along the swing lows. The two lines form a triangle. Traders often watch for breakouts from triangle patterns. The breakout can occur to the upside or downside.Ascending triangles are often called continuation patterns since price will typically break out in the same direction as the trend that was in place just prior to the triangle forming.An ascending triangle is tradable in that it provides a clear entry point, profit target, and stop-loss level. It may be contrasted with a descending triangle.
Ascending Triangle
Definition
An ascending triangle is a chart pattern used in technical analysis. It is formed by price movements that allow drawing a horizontal line connecting the highs and an ascending trendline connecting the lows. These two lines form a triangle. Traders often watch for the breakout point of the triangle pattern, which can occur either upwards or downwards. The ascending triangle is often referred to as a continuation pattern because the price typically breaks out in the direction of the trend that was in place before the triangle formed.
Origin
The concept of the ascending triangle originated in the early stages of technical analysis development, particularly in the early 20th century. Pioneers of technical analysis, such as Charles Dow, observed market price behaviors and gradually summarized this chart pattern. Over time, the ascending triangle became a widely used tool in technical analysis.
Categories and Characteristics
Ascending triangles are mainly divided into two categories: bullish ascending triangles and bearish ascending triangles. Bullish ascending triangles typically appear in uptrends, indicating that prices may continue to rise; bearish ascending triangles appear in downtrends, indicating that prices may continue to fall. Characteristics of ascending triangles include: 1. A horizontal line connecting the highs, indicating resistance; 2. An ascending trendline connecting the lows, indicating support; 3. Breakout points are usually accompanied by increased trading volume.
Specific Cases
Case 1: Suppose a stock has formed an ascending triangle over the past few months, with the horizontal line at $50 and the lows gradually rising. Traders can buy when the price breaks above $50 and set a stop loss below the ascending trendline. Case 2: In the forex market, a currency pair forms an ascending triangle and then breaks above the resistance level. Traders can buy at the breakout point and set a profit target based on the height of the triangle.
Common Questions
1. How to identify an ascending triangle? Answer: By connecting the highs with a horizontal line and the lows with an ascending trendline. 2. How to determine the breakout point of an ascending triangle? Answer: The breakout point usually occurs when the price breaks above the horizontal line or the ascending trendline, accompanied by increased trading volume.
