UK Accounting Glossary
An Ascending Triangle is a bullish continuation chart pattern consisting of two converging lines that resemble a “triangle”. The triangle contains the recent price action.
One trend line is drawn horizontally and represents a resistance level that has historically prevented the price from heading higher. The second trend line connects a series of increasing troughs and acts as a support level.
The ascending triangle converges at a point in the future which represents the “decision point”; by the time the decision point is reached the price must either break above the resistance level or break down, falling through the support trend line.
An ascending triangle is generally considered to be a continuation pattern, as it is usually found amid a period of consolidation within an uptrend. As the pattern develops, volume usually contracts.
When the upside breakout occurs, there is usually an expansion of volume to confirm the breakout. While volume confirmation is preferred, it is not always necessary. Once the breakout occurs, buyers will aggressively send the price of the stock higher. The most common price target is generally set to be equal to the entry price plus the vertical height of the ascending triangle.
Quite often the chart pattern looks similar to that shown below. The resistance level turns into a support level and it is usually beneficial to enter the trade with a limit order as the stock price tends to retreat back towards the top of the ascending triangle before taking off.
An ascending triangle has a definitive bullish bias before the actual breakout. This is in contrast to the symmetrical triangle which has a neutral bias and the descending triangle which has a bearish bias.
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This glossary post was last updated: 23rd March 2020.