What is an 'Ascending Triangle'

An ascending triangle is a bullish chart pattern used in technical analysis that is easily recognizable by the right triangle created by two trend lines. In an ascending triangle, one trend line is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trend line connects a series of increasing troughs. Traders enter into long positions when the price breaks out from the horizontal trend line.

The chart below is an example of an ascending triangle in the SPDR S&P 500 Oil & Gas Equipment ETF (XES) that occurred following a prolonged downtrend:

BREAKING DOWN 'Ascending Triangle'

An ascending triangle is generally considered to be a continuation pattern, meaning that it is usually found amid a period of consolidation within an uptrend, but it may also occur as a reversal pattern following a prolonged downtrend. Once the breakout occurs, traders tend to aggressively buy the security and send the price higher on high volume.

The strength and reliability of an ascending triangle pattern depends on the actual pattern more than the prevailing trend. A minimum of two reaction highs and two reaction lows are required to form the ascending triangle pattern's trend lines. But, a greater number of trend line touches tends to produce more reliable trading results. The duration of the ascending triangle pattern can be a few weeks to a few months.

An ascending triangle is the bullish counterpart of a descending triangle.

Trading Ascending Triangles

The ascending triangle pattern represents a period of consolidation during an uptrend, so the volume tends to contract as the pattern develops over time. When the breakout occurs, traders usually look for a significant increase in volume as confirmation of a breakout. The absence of volume during a breakout could lead a false breakout - or a bull trap.

An ascending triangle's price target is generally equal to the entry price plus the vertical height of the triangle. After the breakout occurs, the horizontal trend line turns into a key support level supporting a move higher. The price may move back to these levels before reaching the ascending triangle pattern's long-term price target.

A false breakout from an ascending triangle pattern occurs when the price moves significantly below the horizontal trend line after a breakout occurs and remains lower. In general, these false breakouts could lead to a reversal of the longer-term uptrend, especially if prices continue to move lower on high volume for several periods following the breakout.

Chart courtesy of StockCharts.com.

RELATED TERMS
  1. Symmetrical Triangle

    A symmetrical triangle is a chart pattern characterized by two ...
  2. Triangle

    A triangle is a technical chart pattern created by drawing trendlines ...
  3. Descending Triangle

    A descending triangle is a bearish chart pattern used in technical ...
  4. Continuation Pattern

    A continuation pattern suggests that a trend in a security price ...
  5. Breakout Trader

    A type of trader who uses technical analysis to find potential ...
  6. Diamond Top Formation

    A technical analysis reversal pattern that is used to signal ...
Related Articles
  1. Trading

    Brazil Small Caps Set to Rally 30%

    The iShares ETF tracking Brazilian small caps has formed an ascending triangle pattern, suggesting the potential for a 30% rally.
  2. Trading

    4 Triangle Breakouts Close At Hand

    Triangle breakouts are close at hand in these four stocks. Here's how to trade them.
  3. Trading

    Continuation Patterns: In-Depth Look At Triangles

    We take a closer look at ascending and descending triangles to help traders predict the ultimate breakout direction.
  4. Trading

    Stocks Nearing Triangle Breakout Levels (TIVO)

    Triangles breakouts can provide a risk-controlled way to participate in the next wave of a stock's trend.
  5. Trading

    Carnival Stock in Ascending Triangle Pattern

    This bullish chart pattern suggests that Carnival shares could be set to move 15% higher.
  6. Trading

    Triangle Patterns Suggest These 3 ETFs Are Headed Higher (XLV, EWJ)

    Bullish chart patterns such as the popular ascending triangle suggest that the bulls are in control. Watch these stocks: XLV,EWJ.
  7. Trading

    Watch for These Triangle Breakouts (WY, SU)

    Watch for triangle breakouts in these stocks, which could indicate the trend direction over the next several months.
  8. Trading

    Watch for a New Year Breakout in These Stocks (DHR, FIS)

    The narrowing price patterns in these stocks can't last for long. Watch for a breakout.
  9. Trading

    Upside Breakout Coming? Examine The Chart Patterns

    These four stocks are trending higher and present possible near-term entry points based on chart patterns.
  10. Trading

    Continuation Patterns: An Introduction

    Those random movements in the charts actually form patterns. Learn the basics of what these patterns are.
RELATED FAQS
  1. What are the most common continuation candlestick patterns?

    Learn about the four most common types of continuation patterns found in candlestick charts: triangles, rectangles, flags ... Read Answer >>
  2. What are the main differences between a Symmetrical Triangle pattern and a pennant?

    Understand the key differences between the symmetrical triangle and pennant patterns, including how they differ in formation, ... Read Answer >>
  3. How do I identify a stock that is under consolidation?

    Discover the three major characteristics stocks or securities exhibit when they are trading under a period of price consolidation. Read Answer >>
  4. What Does It Mean When There Is 'Price Action'?

    Price action refers to the day-to-day fluctuation in the price of an asset. Read Answer >>
  5. What are the fundamental differences between a pennant pattern and a flag pattern?

    Understand the basics of both the flag and pennant continuation patterns, their similarities and differences, and how each ... Read Answer >>
  6. Can forex currency pairs exhibit consolidation patterns?

    Learn how forex currency pairs exhibit recognizable consolidation patterns. These patterns offer traders the opportunity ... Read Answer >>
Hot Definitions
  1. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  2. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  3. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  5. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  6. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
Trading Center