Ascending Triangle Pattern
An ascending triangle occurs when there are higher lows, but the highs recur at the same price level due to resistance. Ascending triangles indicate an upward slope, with a flat top and a series of higher lows.
Ascending triangle are generally considered Bullish and are most reliable when found during an up trend. The top part of the triangle appears flat, while the bottom part has an upward slope/inclined. There are numerous instances when ascending triangles act as reversal patterns at the end of a downtrend.
The pattern has a horizontal line which can be called a seller’s line and an upward slanting line called the buyer’s line. These lines are formed because the buyers keep bidding up their price along the upward sloping line but meet resistance along the horizontal line, until the price finally breakout of the horizontal line on heavy volume.
Important Characteristics Of An Ascending Triangle
- Prices touch a high and then decline.
- Bulls re-enter and resume buying taking the place to its earlier highs, wherefrom it once again declines and forms a higher bottom, i.e., the stock keeps on forming higher lows.
- The Bulls again resurface taking the price to a higher level than before.
- Price eventually breaks through the old highs and is pushed even higher as new buying comes in.
- The breakout is generally accompanied by a marked increase in volume.
- A horizontal trend line drawn across the lower highs.
- An upward sloping trend line connecting the higher lows.
- Volume diminishes, Heavy at the beginning of the triangle, it grows lighter at the end.
- Good volume on Breakout.
- Horizontal resistance line becomes a new support level once the price moves above it.
- Any violation of the upward sloping higher lows line may indicate a pull-back and indicate that the pattern has failed.
Descending Triangle Pattern
A descending triangle occurs when there are lower highs, but the lows recur at the same price level due to support. Descending triangles indicate an downward slope, with a flat base and a series of lower highs.
Descending triangle are generally considered Bearish pattern which indicates distribution and are most reliable when found during a down trend. The bottom part of the triangle appears flat, while the top part has a downward slope/inclined. Prices typically drop to a point where the security becomes oversold.
Descending triangles give technical traders the opportunity to make substantial profits over a brief period of time. The most common price targets are generally set to equal the entry price minus the vertical height between the two trend lines.
Descending triangles also offer investors the opportunity to exit a stock in good time.
Descending triangles offer Good short term opportunities for traders to short sell the stock and also provide investors opportunity to move out of a stock in time to avoid further losses.