Michael Jordan or MJ is the greatest basketball player of all time.
Since his NBA debut in 1984, he was under the media spotlight for his talent, skills, and showmanship.
By 1993, MJ won every individual and team awards and championship. You name one, it’s likely in his showcase gallery now.
In 1994, he surprised everyone. MJ retired to play professional baseball.
Why would an athlete like him take a periodic time off in his prime?
MJ cited that he no longer enjoyed the game due to exhaustion. His ever-growing celebrity status solidified his withdrawn feelings for his first love too.
But he made a comeback to basketball in 1995 after a series of events while he was taking a break.
MJ was back with a new burning desire to win. He wanted to prove the critics including himself that he was not a ‘has-been.’
Boy, he impressed the world with three more NBA championship.
Indeed, the time-off helped with his games. And that stamped his name as the greatest NBA player of all time.
Like MJ’s journey, the next chart pattern that you'll be reading sings a similar tune.
After a strong price run, it'll take a break for weeks before resuming its uptrend.
What is this pattern called? Why it behaves this way? How do you profit from the chart pattern?
Continue below to find out more.
An ascending triangle is my favorite bullish chart pattern. It usually forms during a price uptrend as a continuation pattern.
You can recognize this chart pattern by the distinct shape.
Look out for two merging trend lines. They are the flat top that acts as a resistance level. It is attempting to block rising support price line.
The price will swing up and down to form a pattern like a triangle. These higher lows say that the bulls are gaining strength.
It presents you with a possible buying opportunity.
Enter into positions when the price breaks above the weakening resistance line. The chart above is an example of an ascending triangle.
WHY ASCENDING TRIANGLE
In a strong bull market, the ascending triangle is a proven strategy to make money in stock trading. Besides that, it offers consistent results during market rallies.
Continuation pattern signals that the market is ready to move higher.
Higher lows with declining volumes signify there is less interest to sell-off.
And when the price breaks out, it does with a strong volume. It means there is a significant accumulation of shares by institutional investors. It also gives the small-time investors conviction to enter.
HOW IT'S FORMED
Imagine when the price moves up and meet the top resistance level. It responds with massive sell-off that increases the supply greater than demand. It’ll push the price down.
Once the price pullbacks, the stock becomes attractive to investors. They’d buy the stock which that increases the demand pushing the price up. As it meets the old resistance line, the price again drops due to increased supply.
But the price falls lesser than the prior. Now the price moves up with higher lows. Again, the price climb meets the resistance area and falls.
This up-and-down motion repeats for several times. As higher lows continue to form, an imaginary trend lines their bottoms together. It'd create a up-sloping lower side of the triangle.
By now, there is a trend for sell-offs at the resistance level. It means that higher highs are more or less peaking at the same region. When you streak a line across these peaks, it’ll give us the horizontal upper side of the triangle.
This top horizontal line and the lower up sloping lines, when extended will join at the right side. The shape formation is complete by an imaginary line joining the left end of these lines.
Now, the formation of ascending triangle is complete.
Because of the strength in demand, it finally breaks out of the resistance level to give us a trade.
Here are five things that you need to look out for in ascending triangle:
There must be an existing uptrend to qualify an ascending triangle as a continuation pattern,
2. Top Horizontal Line:
The respective highs or peaks should be close each other. There should be some distance between the highs, and low between them.
3. Lower Ascending Trend Line:
The lows or troughs should be higher than the previous. There should also be some distance between the lows, and high between them. If a next low is equal to or less than the previous low, then the ascending triangle is invalid.
The length of the pattern stretches from weeks to many months. In average, it'll last from 1-3 months.
Volume should contract during the pattern information. There should be a large volume to support the upside breakout.
WHEN TO BUY & SELL
To buy in an ascending triangle, enter when the price breaks through the resistance level.
There are two ways to sell-off your shares.
The first method, you can place the stop loss below the horizontal resistance line.
The chart below demonstrates where to put the entry (blue), stop loss (red)
The next option is to wait for the price to break out of the top. Then sell your shares once it hits your profits target, i.e., 5%, 10%, 15%, etc.
Ascending triangles are bullish and most reliable when found in an uptrend.
The pattern formation means resistance line is weakening. Also, an upwards move is likely. It presents you with a possible buying opportunity.
You trade after the price breach the resistance level. Either on a breakout or a retest of the resistance line. A powerful breakout usually comes with an increase in volume.
You can sell by placing a stop loss below the old horizontal resistance. Or take profit when it reaches your target price.
Do you enjoy what you read?
Hit the LIKE button and SHARE with your friends so more can benefit from this post.
Leave a COMMENT and tell me one lesson that you'll take away from here.