What is an ascending triangle?
An ascending triangle is a bullish pattern. It is a high probability trade. This pattern plays off support and ressistance. It forms with rising support occuring with ressistance that is staying the same. Eventually the stock will break out of resistance indicating a buy signal. Let us look at an example. This stock went up and hit a top or ressistance level at $87. When it did this it came down to $78 and went up again. This formed a bottom or support level at $78. As you can see, the ressistance level stayed at $87. This happened while the support level rose from $78 to $82 and so on.
Finally the stock broke the resistance of $87. This is called a breakout. When breakouts occur it is a good sign that the stock will move higher. Let's say that we wanted to trade this stock. We buy it during the breakout, and then the stock goes from $88.5 to $97.5 in a couple months. Wow! A 10% move in a couple months! And that's just with buying the stock. Just think if you would have bought a call or used another creative strategy.
|
