Ascending triangle patterns are bullish patterns. They have three 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, there is bullish confirmation of a breakout.
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Ascending Triangle Pattern Meaning
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 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 these are typically continuation patterns.
Basics
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 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 depend on the pattern itself instead of its current trend. Two highs and two lows are needed to form the trend lines, but the more the price touches the trend lines, the more information it tells the trader. Look for spinning tops near support or marubozu candlesticks inside the ascending triangle for signals that support continues to hold.
What It Looks Like:
First Element: Upward slope followed by a flat top pause and consideration
Significance: The market has tried multiple times to break the resistance top but couldn’t because the bears persist. Because of this, a resistance line develops.
Second Element: A slanting or a rising trend line moving upwards. Significance: The rising support trend line means the price is making higher lows; the bulls persist.
The Setup
The duration it takes an ascending triangle pattern to form does not matter; the most important is how strong the formation is set up. You need at least two highs to form the top horizontal trend line and 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 two lows to form the lower trend line. Lows need to be higher than the last as they move 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; we cannot have them close together. The ascending triangle is invalid if the most recent low is the same or lower than the previous one.
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.
Ascending Triangle Pattern Trading Strategy
- 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 the price breaks out of the top of the flat top and holds, take a long entry
- Use a candlestick close midway below the lower trend line as your stop
Ascending triangle patterns continue a trend in place. Waiting for confirmation is smart; 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.
How to Spot an Ascending Triangle Breakout
- We have two key elements that make up the ascending triangle pattern:
- 1. Bottom Trend Line (Support) – That’s formed as the stock sets higher lows. The more touch points we have on the trend line, the more reliable the pattern.
- 2. Flat Horizontal Resistance Line – That’s formed as the stock continues to reject its previous highs (for a given period). Once again, the more touch points on the resistance line, the more reliable the pattern will be.
Timing Your Trigger Entry Point
For fear of a false breakout on the ascending triangle breakout, you must wait for a close above the resistance line. I can’t stress enough that you buy as soon as the break above the flat resistance level happens.
Psychology of Ascending Triangle
Thinking of the ascending triangle breakout as an ongoing battle between the bulls (buyers) and the bears (sellers) playing out on the chart can be helpful.
In the beginning, the forward momentum of the bulls pushes the price higher. Unfortunately, they hit a wall, and a flat resistance level forms as they get overpowered by the bears.
For whatever reason, with each new higher low, the bulls become slightly more aggressive. As the bulls persist, they set higher lows in the upward-moving bottom trend line.
It’s a constant push-pull tug of war with the price confined to the vertex of the triangle. We’ve reached a climax; things could go either way.
The bears win, and the price falls through the bottom trend line. Or, the bulls win and break the flat resistance line.
Once this flat resistance line breaks hold on for the ride; a breakout’s triggered, and the bulls push the price up.
Ascending Triangle Example
Multiple ascending triangles can be seen on the $AAPL chart above. The structure tends to form in bullish trends, with stocks trading above their nine-day moving average. TrendSpider lets traders see shorter time frame charts versus longer moving averages on the same chart.
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Ascending Triangle Breakout
Bullish. We consider the ascending triangle pattern bullish because it leads to a bullish breakout. Once spotted, traders go long when the upper resistance level breaks.
A Continuation Pattern. Unlike a rounding bottom or reversal pattern, this strategy is a bullish continuation pattern. Whenever we see an ascending triangle, we consider it a positive continuation pattern. In other words, it’s predictive, and the uptrend should continue. Flexible. Once identified, ascending triangle patterns can be used and applied on any time frame (i.e., intraday, hourly, daily, and weekly charts.
An ascending triangle on the $SPY intraday 5-minute chart. Note how the bulls increased their buying volume as we broke over the flat top (flat top breakout)
Ascending Triangle 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 the price remains lower.
I often see these “fake-out breakouts” during lunch when volume consolidates. During this time, we could see a 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 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. You can only take what the chart gives.
A Few Things We’ve Learned
- Not Everything Is As It Seems. Often, the triangle pattern will rarely have a perfect shape. In other cases, you’ll spot the ascending wedge pattern, which will break the resistance line, but there’s no real momentum behind the breakout. Alternatively, the pattern develops with spiky bars that lead to false breakouts.
- Volume Matters. Once the triangle breakout happens, a surge in volume needs to happen. Otherwise, there’s not enough gas in the tank to sustain momentum.
- Location Matters. If you spot the ascending triangle inside a big trading range, the solid resistance level might not be all that significant. However, if you spot the ascending triangle price formation in the middle of a bullish trend, take note. Under these circumstances, the pattern matters.
Key Points to Consider
- One element of a good ascending triangle breakout is a flat resistance level that’s been hit numerous times. Without a doubt, the more a resistance line is tested, the more likely it will fail to hold at the resistance level.
- Why don’t you apply the RSI 20-periods to your chart and look to see a bearish divergence developing on the RSI indicator (i.e., RSI is decreasing while the support trend line is increasing)?
- Verify that the preceding trend was bullish. Moreover, a prior uptrend suggests the breakout has a higher probability of happening to the upside.
Final Thoughts
The ascending triangle breakout strategy is an extremely powerful chart setup that exploits many of the supply and demand imbalances in the market. Using price action in conjunction with it will complete the trading strategy.
Identifying the setup and recognizing the opportunity before others is a perfect head start.
Luckily, if you missed the beginning of the trend, you can get in and ride the trend up. Thank you for reading! Don’t forget to read our blog posts on other powerful chart patterns.
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.
The target for an ascending triangle breakout is close to the equal price difference of the widest part of the triangle area. Then add the difference between the resistance area and low to the resistance level at the breakout.
An ascending triangle pattern is a bullish continuation pattern. It has a horizontal resistance level with a sloping support level, which creates higher lows. It signals that an uptrend is likely to continue.
