Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30 years of stock market experience and widely regarded as a leading expert on chart patterns. His four books, including the best selling Encyclopedia of Chart Patterns, have been translated into seven languages. He may be reached at

Support this site! Clicking on his books below takes you to Amazon.com. If you buy ANYTHING, they pay for the referral.

Bulkowski's Ascending Triangles

Market

Industrials (^DJI):

Transports (^DJT):

Utilities (^DJU):

Nasdaq (^IXIC):

S&P 500 (^GSPC):

As of 05/16/2012

12,599 -33.45 -0.3%

5,101 -6.43 -0.1%

467 -0.66 -0.1%

2,874 -19.72 -0.7%

1,325 -5.86 -0.4%

YTD

3.1%

1.6%

0.6%

10.3%

5.3%

Tom's Targets Overview: 05/14/2012

13,300 or 12,500 by 06/01/2012

5,400 or 5,000 by 06/01/2012

480 or 460 by 06/01/2012

3,000 or 2,850 by 06/01/2012

1,420 or 1,310 by 06/01/2012

Test Portfolios and CPI

Indus. strength: 11.1%

Mutt Losers: -4.2%

Mutt Winners: 2.3%

Wilder RSI: -2.5%

CPI:

on 05/02/2012

Overview

Important Results

Identification Guidelines

Trading Tips

Example

Other Examples

Ascending Triangle Overview

On pages 711 to 729 of the book Encyclopedia of Chart Patterns, Second Edition, you can read the complete treatment of ascending triangles, including identification guidelines, focus on failures, statistics, trading tactics, and a sample trade.

The ascending triangle is a mediocre performer despite its reputation as a reliable chart pattern. In fact, the ascending triangle performs best when the breakout is downward, especially in a bear market.

Click ascending triangle to read about the Elliott wave version.

Important Bull Market Results for Ascending Triangles

Overall performance rank for up/down breakouts (1 is best): 17 out of 23; 9 out of 21

Break even failure rate for up/down breakouts: 13%; 11%

Average rise/decline: 35%; 19%

Throwback/pullback rate: 57%; 49%

Percentage meeting price target for up/down breakouts: 75%; 68%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Ascending Triangle Identification Guidelines

Characteristic	Discussion
Price trend	Can be any direction leading to the chart pattern.
Shape	Triangular. Prices move between two converging trendlines.
Trendlines	Two trendlines bound prices; the top trendline is horizontal and the bottom one slopes upward.
Crossing	Price must cross the pattern from side to side, filling the triangle with price movement, not white space.
Touches	Price must touch each trendline at least twice, forming distinct valleys and peaks.
Volume	Trends downward 77% of the time.
Breakout	Upward 70% of the time and 61% of the way to the triangle apex (upward breakouts) and 62% of the way for downward breakouts.

Ascending Triangle Trading Tips

Consult the figure on the right.

Trading Tactic	Explanation
Measure rule	Compute the height from the price of the horizontal trendline (B) to the lowest valley in the pattern (A) and then multiply it by the above “ percentage meeting price target.” Add it (upward breakouts) or subtract it (downward breakouts) from the breakout price. The breakout price is the point at which price pierces the trendline. The associated link provides more information.
Stop	Place a stop loss order on the side opposite the breakout unless that would be too far away. Click the link on the left for stop placement information. For example, if the breakout is upward, a stop at any of the minor lows on side A would work well. For downward breakouts, use the price of B as the stop price.
Rise	Patterns with a long-term rise (over 6 months) leading to the triangle show price rising an average of 37% after an upward breakout. Those with a short-term decline (less than 3 months) leading to the triangle show a 41% average rise after an upward breakout.
Throwback and Pullbacks	Throwbacks and pullbacks hurt post breakout performance. The links on the left define terms. For performance information on throwbacks and pullbacks, click the associated link.

The Measure Rule

Score your chart pattern for
performance by clicking here

Expect the market to turn when it reaches the apex of the triangle. See Triangle Apex and Turning Points.

Ascending triangle chart pattern example

Ascending Triangle Example

The figure shows an example of an ascending triangle. Price bounces between two converging trendlines, the top one is horizontal and the bottom one slopes upward.

To calculate a price target, subtract the price of the lowest valley in the chart pattern (A) from the price of the top trendline (B). That gives the height. Multiply the height by 75% (for upward breakouts, the percentage meeting price target from Important Bull Market Results table near the top of this page) and add it to the price of the top trendline B. In this example, point C makes for a good stop location.

For downward breakouts, compute the height in the same manner only subtract the height from C.

-- Thomas Bulkowski