As of 03/05/2021
  Indus: 31,496 +572.16 +1.9%  
  Trans: 13,628 +408.32 +3.1%  
  Utils: 814 +13.86 +1.7%  
  Nasdaq: 12,920 +196.68 +1.5%  
  S&P 500: 3,842 +73.47 +1.9%  
YTD
 +2.9%  
 +9.0%  
-5.9%  
 +0.2%  
 +2.3%  
  Targets    Overview: 02/26/2021  
  Up arrow32,750 or 30,700 by 03/15/2021
  Up arrow14,500 or 12,900 by 03/15/2021
  Up arrow850 or 770 by 03/15/2021
  Up arrow14,200 or 12,700 by 03/15/2021
  Up arrow4,000 or 3,700 by 03/15/2021
CPI (updated daily): Arrows on 3/5/21
As of 03/05/2021
  Indus: 31,496 +572.16 +1.9%  
  Trans: 13,628 +408.32 +3.1%  
  Utils: 814 +13.86 +1.7%  
  Nasdaq: 12,920 +196.68 +1.5%  
  S&P 500: 3,842 +73.47 +1.9%  
YTD
 +2.9%  
 +9.0%  
-5.9%  
 +0.2%  
 +2.3%  
  Targets    Overview: 02/26/2021  
  Up arrow32,750 or 30,700 by 03/15/2021
  Up arrow14,500 or 12,900 by 03/15/2021
  Up arrow850 or 770 by 03/15/2021
  Up arrow14,200 or 12,700 by 03/15/2021
  Up arrow4,000 or 3,700 by 03/15/2021
CPI (updated daily): Arrows on 3/5/21

Bulkowski on Busted Ascending Triangles

 

Updated with new statistics on 12/28/2020.

The third edition of this book Encyclopedia of Chart PatternsEncyclopedia of Chart Patterns. has a table in most chapters discussing busted pattern performance.

$ $ $

Busted Ascending Triangles: Summary

Price can breakout of an ascending triangle in any direction. When price moves no more than 10%, reverses direction and closes beyond the side opposite the breakout, it busts the chart pattern.

In a bull market, price averages a drop of 13% (upward breakout, downward bust) and 36% (downward breakout, upward bust), but can be much higher if it busts just once.

Busted Ascending Triangles: Single Busts

Picture of Bassett Furniture (BSET) on the daily scale.

I show a chart of a busted ascending triangle in Bassett Furniture on the daily scale. The ascending triangle is outlined with red trendlines. Price pierces the top trendline at A and confirms the chart pattern with an upward breakout. However, price does not rise far before it reverses. When price closes below the bottom of the triangle, which occurs at B, it busts the upward breakout. If price continues to move lower by at least 10%, then the chart pattern becomes a single busted ascending triangle.

For a single bust, look for:

  1. Price breaks out either upward or downward from an ascending triangle by closing outside of the trendline border. This occurs at A in the figure.
  2. Price must move less than 10% before reversing.
  3. For upward breakouts, price then closes below the bottom of the ascending triangle (B). For downward breakouts, price closes above the top of the ascending triangle.
  4. Price continues moving in the new direction by at least 10%.

For the last point, 4, if price fails to move more than 10%, then it could be forming a double busted ascending triangle.

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Busted Ascending Triangles: Double Busts

Picture of Oneok (OKE) on the daily scale.

The figure to the right shows an example of a double busted ascending triangle in Oneok.

The ascending triangle forms between the two red trendlines. This one has price closing below the up-sloping trendline for a downward breakout. At A, the downward move reverses and climbs to B. When price closes above the top of the triangle, it busts the downward breakout for the first time. Price continues climbing to E, which is less than 10% above the highest peak in the triangle.

Then price tumbles. When it closes below the lowest valley in the ascending triangle, it busts the chart pattern for the second time. That happens at C. Notice that price continues at least 10% below the blue trendline (which shows the lowest valley in the pattern).

For a double bust, look for these elements.

  1. Price busts a confirmed ascending triangle for the first time.
  2. Price must move less than 10% before reversing (the move from the red line at D to E, in this example).
  3. After an upward breakout, price closes below the bottom of the ascending triangle (C) or above the top after a downward breakout.
  4. Price then moves at least 10% in the new direction.

If price fails to move at least 10% in the new direction, then it is a triple busted ascending triangle.

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Busted Ascending Triangles: Triple Busts

Picture of Exelon (EXC) on the daily scale.

Exelon, pictured on the right, is a good example of a triple busted ascending triangle.

The triangle is outlined in a thin blue line on the far left of the chart. To the right of A, price closes below the up-sloping trendline, constituting a breakout. Price drifts lower to B before reversing direction.

When price closes above the top of the triangle at C, it busts the triangle for the first time. Price continues to move higher to D, but that move is less than 10% above the blue line. Price reverses and drops to E. Notice that E is below the red line which highlights the bottom of the ascending triangle. The drop from the red line to E is less than 10%. The D to E move busted the triangle for the second time.

Then price stock reverses again and rises to G, closing above the blue line and busting the triangle for the third time. If price continues rising by at least 10% above the blue line, then the busting process would end at three busts. Otherwise, the stock can continue busting the triangle additional times by making tall swings above and below the chart pattern.

For a triple (or more) busted ascending triangle, look for the following:

  1. Find a double busted ascending triangle except that price fails to move more than 10% after the second bust (the drop from the red line to E). In this example, C is the first bust, and E is the second.
  2. Price reverses direction again and closes below the bottom or above the top of the chart pattern, busting it for a third time.
  3. If price fails to move more than 10% before reversing and closing on the opposite side of the ascending triangle, additional up and down cycles may continue, busting the ascending triangle more than three times.

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Busted Ascending Triangles: Performance

Here's a few statistics from the book. This is for ascending triangles with downward breakouts (so they bust upward).

Busted Ascending Triangles: Trading

Picture of Crown Holdings (CCK) on the daily scale.

How could you trade a busted ascending triangle? The figure on the right gives an example.

An ascending triangle appears in December 2010. Price breaks out downward from this pattern at A then curls upward. To bust the pattern, I require price to close above the top of the triangle and that occurs at C. However, if you placed a buy order at a penny above the top of the triangle, that would get you into the trade at B (34.00). If you waited for a close, then you would buy into the stock at the open the day after C (35.60)

Waiting for a close above the top of the pattern before buying in the next day is the safer choice.

Price climbed in a strong push higher, joining a market that was also making a straight-line run up.

In late February, the market faltered, but the stock waited until March to weaken. Nevertheless, it too, tumbled and then moved sideways until finding firmer ground in May.

After that, another strong push higher saw the stock reach D, at 41.58, about two weeks after the market peaked. Point D was the high-water mark for the stock. It returned to below 30 within 5 months.

If you traded this one perfectly, you could have made between 22% (buying at B) to 17% (entering at the open the day after C).

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-- Thomas Bulkowski

See Also

 

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My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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