Written by and copyright © 20052017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
See Privacy/Disclaimer for more information.
Information on busted chart patterns is discussed in my book,
Visual Guide to Chart Patterns.
You can find information in the book in Chapter 22: "Busted Pattern Buy Setups" (starting on page 229) and in Chapter 25, "Busted Pattern Sell Signals" starting on page 271.
I show a picture of the book on the right.
If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks.  Tom Bulkowski
$ $ $
Busted Ascending Triangle Summary
Price can breakout of an ascending triangle in any direction. When price moves less 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 11% (upward breakout, downward bust) and 26% (downward breakout, upward bust), but can be much higher if it does not bust again.
Although samples are few and the results subject to change, upward breakouts do best when the breakout price is above the 200day simple moving average. Downward breakouts do best when
the breakout price is below the 200day simple moving average.
Also for downward breakouts, when the trend start is below the busted triangle, the average trade tends to outperform.
Single Busted Ascending Triangles
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:
 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.
 Price must move less than 10% before reversing.
 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.
 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.
Double Busted Ascending Triangles
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 upsloping 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.
 Price busts a confirmed ascending triangle for the first time.
 Price must move less than 10% before reversing (the move from the red line at D to E, in this example).
 After an upward breakout, price closes below the bottom of the ascending triangle (C) or above the top after a downward breakout.
 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.
Ascending Triangle, Triple Busts
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 upsloping 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:
 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.
 Price reverses direction again and closes below the bottom or above the top of the chart pattern, busting it for a third time.
 If price fails to move by 10% or more 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.
Methodology for Testing Busted Ascending Triangles
I found 1,645 ascending triangles in 808 stocks dating back as far as July 1991 to September 2011. Few stocks covered the entire period. All of the ascending triangles I found manually either
using a historical search or real time (looking at my stocks each day). The real time additions prevented any lookahead bias since I am not privy to future price movements.
I then used software to measure performance and flag busted chart patterns.
Gauging performance uses the same method as I used to catalog nonbusted chart patterns. That is, the search for the new ultimate high or low proceeded as described in the
glossary. Thus, the numbers reported in Busted Ascending Triangles Results (next section) should be considered perfect trades.
Do not expect to duplicate the results in actual trading. The numbers should be used only for comparison purposes to other chart patterns.
Busted Ascending Triangles Results
The following numbers are the results from perfect trades in bull markets, unless otherwise noted. Do not expect actual trading results to match those discussed below. Use the numbers
only for comparison purposes with other chart patterns.
How often do ascending triangles bust?
Upward Breakouts
 Single busts: 14% of the time.
 Double busts: 8% of the time.
 Three or more busts: 4% of the time.
 All busted ascending triangles: 26% of the time.
Downward Breakouts
 Single busts: 27% of the time.
 Double busts: 6% of the time.
 Three or more busts: 7% of the time.
 All busted ascending triangles: 40% of the time.
Of busted ascending triangles, what is the frequency distribution?
Upward Breakouts
 Single busts: 54% of busted ascending triangles bust only once.
 Double busts: 32% of them bust twice.
 Three or more busts: 15% of them bust at least three times.
Downward Breakouts
 Single busts: 67% of busted ascending triangles bust only once.
 Double busts: 15% of them bust twice.
 Three or more busts: 17% of them bust at least three times.
If you trade a busted ascending triangle with an upward breakout, there is an 54% probability that it will bust just once. Thus, 46% fail to show price dropping by more
than 10% below the bottom of the ascending triangle.
For downward breakouts, 67% of them will bust just once, meaning that 33% fail to rise more than 10% above the top of the triangle.
What is the average move for single busted ascending triangles? As measured from the bottom (the lowest valley) or the top (the highest peak) of the chart pattern
to the ultimate low or high the move averaged:
Upward Breakouts
 The average drop: 20%
 Median (mid range) drop: 18%
 By comparison, all triangles* (both busted and nonbusted ascending triangles) with downward breakouts drop: 14% (average), 13% (median)
Downward Breakouts
 The average rise: 40%
 Median (mid range) rise: 31%
 By comparison, all triangles* (both busted and nonbusted ascending triangles) with upward breakouts rise 34% (average), 22% (median)
* I decided to include busted triangles in the mix because a trader cannot know ahead of the breakout that the triangle will bust. To remove all of those that did bust is to remove most losing
trades, which is unfair. Excluding busted triangles, upward breakouts gain 48% and downward breakouts lose 22%.
What is the move for perfect trades after all busted ascending triangles?
 Upward breakout, the average drop: 11%
 Upward breakout, median (mid range) drop: 9%
 Downward breakout, the average rise: 26%
 Downward breakout, median rise: 21%
What is the failure rate of all busted ascending triangles in bull markets? The answer appears in the below table.
Failure Rate for Busted Ascending Triangles, Upward Breakouts
Failure rate:  5%  10%  15%  20%  25%  30%  35%  50%  75%  >75% 
Number of ascending triangles:  78  52  36  22  21  10  8  10  4  0 
Percentage:  32%  22%  15%  9%  9%  4%  3%  4%  2%  0% 
Cumulative:  32%  54%  69%  78%  87%  91%  94%  98%  100%  100% 
For example, there were 78 ascending triangles that failed to show price dropping at least 5% below the bottom of the ascending triangle.
Those 78 represent 32% of all busted ascending triangles. On a cumulative basis (a running total), the 78 also represent 32% of all busted ascending triangles with upward breakouts.
The median drop of all busted ascending triangles is 9%. You can see that by interpolating between the 5% and 10% columns.
Thus, half of all busted ascending triangles will see price drop 9% in a bull market, providing they are traded perfectly.
Failure Rate for Busted Ascending Triangles, Downward Breakouts
Failure rate:  5%  10%  15%  20%  25%  30%  35%  50%  75%  >75% 
Number of ascending triangles:  38  24  17  9  19  12  9  20  14  22 
Percentage:  21%  13%  9%  5%  10%  7%  5%  11%  8%  12% 
Cumulative:  21%  34%  43%  48%  58%  65%  70%  80%  88%  100% 
Read the table just as you did the prior one. Let's begin with the 10% column. Twentyfour triangles saw gains from over 5% to less than or equal to 10%. They represented 13% of busted
triangles. On a cumulative basis, 34% of triangles saw price climb up to 10% after busting a downward breakout (as measured from the top of the pattern to the ultimate high).
Trading Busted Ascending Triangles
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 straightline 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 highwater 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).
Additional Trading Tips for Busted Ascending Triangles
For upward breakouts, when price drops after it busts, busted triangles with the breakout price above the 200day simple moving average tend to perform slightly better: 13% (102 samples)
versus 10% (131 samples).
For downward breakouts, the rule is reversed. When the breakout price is below the 50day simple moving average, the busted triangle sees price rise by 31% (only 15 samples)
versus 26% (169 samples). Using the 200day simple moving average, the gains average 37% (41 samples) versus 23% (140 samples) for below and above the moving average, respectively.
Note that most traders wait for price to be above the 200day SMA before trading. These numbers show what surprises testing can reveal. However, the samples are few in most cases,
so expect the results to narrow or even flip.
For a definition of the trend start, visit the glossary.
When the trend start is above the busted ascending triangle and it breaks out downward, the busted pattern sees the stock rise by 22% (57 samples). If the trend start is below
the busted triangle, the rise averages 26% (114 samples). Upward breakouts show no advantage: 11% versus 12% for above and below the trend start, respectively.
Entry Setup for Busted Ascending Triangles
As an entry setup, here are the rules for trading busted ascending triangles.
For upward breakouts...
 Price must confirm an ascending triangle by closing above the highest peak in the pattern.
 Price rises less than 10% before reversing and closing below the bottom of the ascending triangle. This busts the pattern.
 Show a 200day simple moving average. If the breakout price is below the moving average, skip the trade.
 Place a conditional order to short the stock if price closes a penny below the bottom of the ascending triangle.
 Place a stop a penny above the top of the triangle. If the stop location is too far away, adjust the stop accordingly,
but recognize that you stand a greater chance of failure since price often retraces back into the pattern.
 Cover the short when the trend changes.
For downward breakouts...
 Price must confirm an ascending triangle by closing below the lowest valley in the pattern.
 Price drops less than 10% before reversing and closing above the top of the ascending triangle. This busts the pattern.
 Locate the trend start leading to the ascending triangle. If the trend start is above the top of the ascending triangle, skip the trade.
 Show a 200day simple moving average. If the breakout price is above the moving average, skip the trade.
 Place a conditional order to buy the stock if price closes a penny above the top of the ascending triangle.
 Place a stop a penny below the bottom of the triangle. If the stop location is too far away, adjust the stop accordingly,
but recognize that you stand a greater chance of failure with closer stops.
 Cover the short when the trend changes.
 Thomas Bulkowski
Written by and copyright © 20052017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
See Privacy/Disclaimer for more information.
Her kisses left something to be desired  the rest of her!
