|
|
|
The ascending triangle is a mediocre performer despite its reputation as
a reliable chart pattern. In fact, the ascending triangle performs best when the breakout is
downward, especially in a bear market. For more information see pages 711 to 729 of the book
Encyclopedia of Chart Patterns, Second Edition
and the following...
|
|
|
|
|
|
|
|
|
|
Score your chart pattern for
performance by clicking
here |
|
Important Bull Market Results
Overall performance rank for up/down breakouts (1 is best): 17 out of
23; 9 out of 21
Break even failure rate for up/down breakouts: 13%; 11%
Average rise/decline: 35%; 19%
Throwback/pullback rate: 57%; 49%
Percentage meeting price target for up/down breakouts: 75%; 68%
Identification Guidelines
|
Characteristic |
Discussion |
|
Price trend |
Can be any direction leading
to the chart pattern. |
|
Shape |
Triangular. Prices move between
two converging trendlines. |
|
Trendlines |
Two trendlines bound prices;
the top trendline is horizontal and the bottom one slopes upward. |
|
Crossing |
Price must cross the pattern
from side to side, filling the triangle with price movement, not white space. |
|
Touches |
Price must touch each trendline
at least twice, forming distinct valleys and peaks. |
|
Volume |
Trends downward 77% of the
time. |
|
Breakout |
Upward 70% of the time and
61% of the way to the triangle apex (upward breakout) and 62% of the way for downward breakouts. |
Trading Tips
|
Trading Tactic |
Explanation |
|
Measure rule |
Compute the height from the price of the horizontal
trendline (B) to the lowest valley in the pattern
(A) and then multiply it by the above “
percentage meeting price target.” Add it (upward breakouts) or subtract it
(downward breakouts) from the breakout price. The breakout price
is the point at which price pierces the trendline. The associated link provides
more information. |
|
Stop |
Place a stop loss order on the side opposite the breakout
unless that would be too far away. Click the link on the left for stop placement
information. For example, if the breakout is upward, a stop at any of the minor
lows on side A would work well. For downward breakouts,
use the price of B as the stop price.
|
|
Rise |
Those with a long-term rise leading to the triangle climb an average of 37% after the upward breakout. Those with a short-term decline leading to the triangle show a 41% average rise after the upward
breakout. |
|
Throwback
and
Pullbacks |
Throwbacks and pullbacks hurt
postbreakout performance. The links on the left define terms. For performance
information on throwbacks
and pullbacks,
click the associated link. |
|
|
|
|
|
|
The Measure Rule |
|
Example
The above figure shows an example of an ascending triangle. Price bounces between two converging trendlines, the
top one is horizontal and the bottom one slopes upward.
To calculate a price target, subtract the price of the lowest valley in the chart pattern (A) from the price of the top trendline (B). That gives the height. Multiply
the height by 75% (for upward breakouts, the percentage
meeting price target from Important Bull Market Results table near the top of this page) and add it to the price of the
top trendline B. In this example, point C makes for a good
stop location.
For downward breakouts, compute the height in the same manner only subtract the height from C.
|
|
They pay for the referral on most items and that helps pay for the cost of this site.
