As of 12/04/2020
Indus: 30,218 +248.74 +0.8%
Trans: 12,742 +155.26 +1.2%
Utils: 856 10.76 1.2%
Nasdaq: 12,464 +87.05 +0.7%
S&P 500: 3,699 +32.40 +0.9%

YTD
+5.9%
+16.9%
2.6%
+38.9%
+14.5%

30,700 or 28,250 by 12/15/2020
13,500 or 11,700 by 12/15/2020
830 or 925 by 12/15/2020
12,500 or 11,400 by 12/15/2020
3,750 or 3,400 by 12/15/2020

As of 12/04/2020
Indus: 30,218 +248.74 +0.8%
Trans: 12,742 +155.26 +1.2%
Utils: 856 10.76 1.2%
Nasdaq: 12,464 +87.05 +0.7%
S&P 500: 3,699 +32.40 +0.9%

YTD
+5.9%
+16.9%
2.6%
+38.9%
+14.5%
 
30,700 or 28,250 by 12/15/2020
13,500 or 11,700 by 12/15/2020
830 or 925 by 12/15/2020
12,500 or 11,400 by 12/15/2020
3,750 or 3,400 by 12/15/2020
 
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.
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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 busts just once.
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.
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:
For the last point, 4, if price fails to move more than 10%, then it could be forming a double busted ascending triangle.
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.
If price fails to move at least 10% in the new direction, then it is a triple busted ascending triangle.
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:
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.
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
Downward Breakouts
Of busted ascending triangles, what is the frequency distribution?
Upward Breakouts
Downward Breakouts
If you trade a busted ascending triangle with an upward breakout, there is a 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
Downward Breakouts
What is the move for perfect trades after all busted ascending triangles?
What is the failure rate of all busted ascending triangles in bull markets? The answer appears in the below table.
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:  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).
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).
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.
As an entry setup, here are the rules for trading busted ascending triangles.
For upward breakouts...
For downward breakouts...
 Thomas Bulkowski
See Also

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