Ascending triangle patterns are a bullish pattern. They have 3 or more previous resistance levels that form a flat top. They also have higher lows that form, causing a bullish trendline. Look for price action to break above the flat top. If price action retests and holds then there is bullish confirmation of a breakout.
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What Are Ascending Triangle Patterns?
An ascending triangle pattern consists of several candlesticks that form a rising bottom and at least two to three peak levels that form a flat top due to horizontal resistance. The rising bottom is formed using trend lines by connecting at least two to three higher lows.
Ascending triangle patterns are bullish formations that form during an uptrend as a continuation of the trend. There are some instances where an ascending triangle pattern could form a reversal pattern but they are typically continuation patterns.
Two trend lines form this pattern. One trend line is horizontal while the other connects different price points as it heads up. The horizontal line has been a strong resistance level. Price cannot seem to break that line. Hence the ascending triangle patterns.
This trend generally forms during consolidation within an uptrend. Traders tend to get an entry when the price has broken the key resistance level. This increases buying pressure which causes the price to increase when stock trading. The reliability and strength of the ascending triangle depends on the pattern itself instead of its current trend. 2 highs and 2 lows are needed to form the trend lines, but the more price touches the trend lines the more information it tells the trader. Look for spinning tops near support or maruboza candlesticks inside the ascending triangle for signals that support is continuing to hold.
Confirmation
Waiting for confirmation with ascending triangle patterns will help keep the trader from falling into a bull trap; do not get caught in a false breakout. A large increase in volume can be confirmation the breakout has occurred.
A false breakout on an ascending triangle pattern happens when the price falls significantly below the horizontal trend line, which is resistance, after the breakout. Then price remains lower.
Often see these “fake out breakouts” during lunch when volume is often consolidating. During this time could see an brief increase in volume which could cause a slight push on the price. However, since the volume is not sustained it creates a “bull trap” or a false signal due to lack of information. This is why waiting for confirmation and multiple tools pointing in the same direction is so important during a trade.
No one ever wants to leave money on the table but getting greedy can greatly increase the chances of falling for the trap. Only take what the chart gives
Multiple ascending triangles can be seen on the $AAPL chart above. The structure tends to form up in bullish trends with stocks trading above their 9 day moving average. TrendSpider lets trader see shorter time frame charts versus longer time frame moving averages on the very same chart.
The duration it takes an ascending triangle patterns to form does not matter; most important is how strong the formation is set up.
Need at least 2 highs to form the top horizontal trend line coupled with a reaction low sandwiched between them. The highs do not have to be exact but should be close in price.
The bottom trend line needs at least 2 lows to form the lower trend line. Lows need to be be higher than the last as it moves up. Higher lows are needed because the line is not straight across; it moves at an angle.
There needs to be distance between the lows; cannot have them close together. If the most recent low is the same or lower than the previous low, the ascending triangle is not valid.
Patterns can break down; things such as news, decrease in volume, increased or decreased buying/selling pressures, and much more can affect the trend and direction of a stock.
How to Trade Ascending Triangle Patterns
- Watch for one to form by connecting at least 2 to 3 rising valleys (higher lows) via trend lines
- Connect at least two to three previous highs via horizontal price lines
- Once price breaks out of the top of the flat top and holds take long entry
- Use candlestick close midway below the lower trend line as your stop
Ascending triangle patterns continue a trend in place. Waiting for confirmation is a smart move; do not get caught in a fake out breakout. Be sure to have enough information to make a smart and informed trade. Always wait for confirmation.
Frequently Asked Questions
An ascending triangle is typically a bullish pattern due to the rising higher low formations. The flat top on ascending triangles is formed by connecting at least two to three previous high levels. The bullish confirmation happens when prices breaks above the flat top and then price retests and holds new support.
