How To Profit Using The Ascending Triangle?

The ascending triangle, often referred to as the ‘rising triangle’, is one of the top continuation patterns that appears mid-trend. Traders anticipate the market to continue in the direction of the larger trend and develop trading setups accordingly.

What Is The Ascending Triangle?

The ascending triangle is a bullish continuation pattern and is characterized by a rising lower trendline and a flat upper trendline that acts as support. This pattern indicates that buyers are more aggressive than sellers as price continues to make higher lows. The pattern completes itself when price breaks out of the triangle in the direction of the overall trend.

⚠️ Similar ascending triangle taking shape

The Ascending Triangle as a Bottoming Pattern

The location of the ascending triangle in relation to the trend will determine whether a reversal or continuation of the trend is more likely to occur. It is possible for the ascending triangle to appear at the bottom of a downtrend, indicating that the downward momentum is fading before potentially changing direction. Therefore, the location the pattern appears in is crucially important.

1. Uptrend: The market must be in an uptrend before the ascending triangle appears. This is important and emphasises that traders should not simply trade the pattern whenever the ascending triangle appears.

2. Consolidation: The ascending triangle starts to take on its form as the market enters the consolidation phase.

3. Rising lower trendline: While the market is consolidating, a rising trendline can be drawn by connecting the lows. This ascending trendline shows that buyers are slowly pushing the price up – which provides further support for a bullish trading bias.

4. Flat upper trendline: The upper trendline acts as resistance. Price often approaches this level and bounces off until the breakout eventually occurs.

5. Trend continuation: After price posts a strong break above the upper trendline, traders will look for confirmation of the pattern via continued upward momentum.

Ascending Triangle Measuring Technique

The ascending triangle has an inherent measuring technique that can be applied to the pattern to gauge likely take profit targets.

For the ascending triangle,traders can measure the distance from the start of the pattern, at the lowest point of the rising trendline to the flat support line. That same distance can be transposed later on, starting from the breakout point and ending at the potential take profit level.

The illustration below shows the distance from A to B can be transferred higher up, from C to D, in order to project a possible take profit level.

Entry, Profit Target & Stop Loss Zones

How To Trade The Ascending Triangle?

When trading the ascending triangle, traders need to identify the uptrend taking form. Thereafter, the ascending triangle appears as the candlesticks start to consolidate. The measuring technique can be applied once the triangle forms, as traders anticipate the breakout.

After viewing a strong break above resistance, traders can enter a long position, setting a stop at the recent swing low and take profit target in line with the measuring technique.

SPY chart updates:

Resistance turns into support!

The all-time high VWAP zone continues to be the main resistance area to close above. Until there is a weekly close above the top of this zone, caution is warranted. However, other indicators are suggesting the upside reversal has already started. Breaking above 420 will confirm that the bull is back in action.

Testing stubborn 420 resistance soon?

History suggests that the market has bottomed based on this simple 200D SMA envelope signal. Bull thesis invalidates with a close below the bottom of the 3.3% envelope as shown above.

How history repeats itself

Bears are expecting another plunge but by looking at this data, it’s highly unlikely at the moment. However, nothing is guaranteed with the stock market, only the probability of a bull run is much higher now looking at the last 28 years of price action.

Higher high & higher low into Q2?

The price action has been kept above 200 moving average (red line) and most recently bouncing above the year long trend line (yellow) with a bullish hammer. Can we see 435 to 445 by May 1? Well, we need a major break above 420 with the help of Fed really soon 😅

⚠️ Trading Tips: A need to stay above 408.5/410 for bullish momentum this week. Looking at calls above 405.9 and puts under 404.1 on Monday. Do note that Powell will testify on Tuesday to the Senate Banking Committee and on Wednesday to the House Financial Services panel. Both hearings are set to begin at 10 a.m. Eastern.

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