Trading Ascending Triangles

The idea behind pattern pairs is to pick a chart pattern type (like broadening bottoms with upward breakouts) to buy and another to sell (like double tops). You buy the upward breakout from the broadening bottom, hold for a few years, and sell when a double top appears and breaks out downward. Along the way, you give price a chance to rise far enough to overcome those trades which are stopped out for a loss. This is a trend-following strategy.

Trading Ascending Triangles: Summary

The figure illustrates the idea for trading pattern pairs, where price is the red line and the boxes are chart patterns. This articles assumes you buy an upward breakout either from an ascending triangle or from a busted ascending triangle (price breaks out downward, drops no more than 10%, reverses, and closes above the top of the ascending triangle). Buy as price rises above the top of the ascending triangle.

On the sale side, you can sell the first bearish chart pattern which comes along or wait for your favorite bearish chart pattern to appear and sell then.

Here's a list of the top five performing sell signals, based on annualized gain (annualized because the hold time is often years, in parenthesis).

The following list shows the expected performance of chart pattern pairs, ranked by their expectancy. Expectancy is a way of gauging winning and losing trades and how much money you might make trading a pattern pair. I put the expected profit per trade, per share, in parenthesis.

Trading using a busted chart pattern results in worse performance than using non-busted patterns (at least for ascending triangles as the buy signal).

Trading Ascending Triangles: Entry and Exit Conditions

The databases I built over several decades doesn't identify every chart pattern. There may be plenty of double tops over the years, for example, that I didn't catalog on the way to the one I did catalog. So buying an upward breakout from a ascending triangle and selling at the double top I cataloged would be different than choosing to sell a different double top. However, the following analysis does give a real-world flavor for how well you might do trading chart patterns if you follow the pattern pair strategy.

I used the following 43 chart patterns in the analysis, but some only applied if they were busted.

Trading Ascending Triangles: Stops

I used a stop loss order set a penny below the bottom of the ascending triangle. Price on the way down may have gapped below the stop price (for the sale price), so I used the lower of the stop price or the opening price on the day of sale).

For trailing stops, I removed the stop loss order and used a trailing stop set at 10%, 15%, 20%, or 25% below a peak, never lowering the stop value, but raising it if a higher peak came along during the trade.

In Table 1, I calculated the percentage net gain (the average of gains and losses) when using various trailing stop loss amounts (10%, 15%, 20%, and 25%) for all tested chart patterns according to the busted/non-busted buy/sell configuration. In parenthesis is the size of the average loss so I could detail how losses change with various stop loss orders.

For example, if I tested non-busted ascending triangles and sold various non-busted patterns (ascending triangles, broadening tops, head-and-shoulders tops, and so on), I made an average of 41% ("Stop Loss Only" column) after having a stop loss order in place. Losses averaged 11%. Replacing the stop loss with a 10% trailing stop cut the gain to 5% but also trimmed the average loss to 6%. Using a 25% trailing stop allowed me to keep more money, 23%, but losses climbed to 14%. If I didn't use any type of stop, the gain averaged 95% with losses averaging 28%.

Trading Ascending Triangles: Busted Patterns

Table 1: Various Trailing Stop Settings: Net Profit and (Average Loss)
Data	10%	15%	20%	25%	Stop Loss Only	No Stop
Non-busted buys, non-busted sales	5% (-6%)	10% (-8%)	16% (-11%)	23% (-14%)	41% (-11%)	95% (-28%)
Busted buys, non-busted sales	4% (-6%)	8% (-8%)	9% (-10%)	13% (-13%)	20% (-8%)	58% (-32%)
Non-busted buys, busted sales	5% (-5%)	10% (-8%)	16% (-11%)	21% (-13%)	34% (-10%)	81% (-27%)
Busted buys, busted sales	4% (-6%)	8% (-8%)	11% (-11%)	13% (-13%)	13% (-7%)	55% (-27%)

Trading using a busted chart pattern often results in worse performance than using non-busted patterns (at least for ascending triangles as the buy signal).

Table 2 shows what I found when comparing the performance of non-busted patterns (both buy and sell) with busted and non-busted chart patterns. In 22 or 31 contests (22 or 31 different chart pattern types, depending on which apply), I compared the three combinations of busted and non-busted buy and sell signals to non-busted buy and sell signals. The table below shows the percentage of time the busted combination beat the non-busted combination in the contests.

For example, I found that busted patterns won 32% (7) of the 22 contests when trading using a busted pattern for the sale. The worst performance came from trading (both buying and selling) using busted patterns. That configuration showed performance which fell short of non-busted patterns.

Trading Ascending Triangles: Non-busted Buy, Non-Busted Sale

Table 2: Busted or Non-Busted Contest Winners
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	N/A (benchmark)	32%
Buy busted pattern	13%	0%

Table 3 shows statistics I collected for ascending triangles using the trading rules described above and shown in the figure. A stop loss order was used and priced a penny below the bottom of the ascending triangle (after buying).

For example, if you were to buy the upward breakout from an ascending triangle chart pattern and hold it until you encountered a broadening bottom (the first chart pattern listed in the table), but one with a downward breakout, you'd net an average of 43% on the 173 (44 winners, 129 losers) trades. That's an average of 205% on your winners, 12% average loss on your losers, and holding onto the position an average of 2.2 years. You'd find that only 25% of the trades made money but you'd gain an average of 20% per year (ranking 25th where 1 is best). If you removed the stop loss order and just held on until the broadening bottom with a downward breakout appeared, you'd make an average of 93% per trade.

The expectancy averages $2.95 per share per trade which ranks 43rd where 1 is the best value. Using my data to trade, you'd average $295 per trade.

Notes: All of the above numbers appear in the table except for the average hold time (2.2 years). The rank is based on the net gain for all four performance tables (tables 3 to 6) shown below.

Table 3: Statistics for ascending triangles
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	205%	-12%	43%	20%	25	93%	44/129	25%	$2.95	43
Broadening top	136%	-11%	34%	18%	36	97%	98/219	31%	$5.54	15
Broadening formation, right-angled and ascending	102%	-10%	27%	20%	25	61%	63/130	33%	$1.51	64
Broadening formation, right-angled and descending	134%	-12%	28%	17%	37	59%	32/86	27%	$2.72	46
Broadening wedge, ascending	153%	-11%	49%	34%	1	115%	46/78	37%	$2.73	45
Broadening wedge, descending	168%	-11%	45%	32%	2	96%	26/57	31%	$3.12	39
Bump-and-run reversal top	100%	-12%	39%	30%	4	83%	212/252	46%	$3.57	34
Diamond bottom	88%	-12%	18%	13%	59	81%	13/31	30%	$0.31	78
Diamond top	129%	-12%	37%	20%	25	102%	47/87	35%	$3.30	36
Adam & Adam double top	248%	-10%	62%	28%	6	142%	209/540	28%	$6.79	8
Adam & Eve double top	128%	-11%	30%	15%	50	115%	114/271	30%	$3.41	35
Eve & Adam double top	205%	-11%	46%	23%	14	135%	101/279	27%	$4.82	20
Eve & Eve double top	118%	-11%	28%	16%	44	83%	147/345	30%	$2.85	44
Falling wedge	196%	-12%	40%	25%	9	71%	25/75	25%	-$0.62	83
Head-and-shoulders top	177%	-10%	44%	24%	12	104%	397/974	29%	$4.28	27
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders, complex top	130%	-12%	38%	25%	9	92%	77/141	35%	$3.98	31
Rectangle top	164%	-11%	35%	22%	18	74%	54/153	26%	$4.00	30
Rising wedge	150%	-10%	37%	22%	18	82%	112/267	30%	$2.98	42
Rounding top	168%	-11%	47%	20%	25	73%	75/155	33%	$5.91	12
Ascending scallop	167%	-11%	62%	30%	4	77%	46/67	41%	$4.58	24
Descending scallop	180%	-11%	43%	23%	14	81%	174/444	28%	$2.14	53
Scallop, inverted and ascending	232%	-11%	70%	24%	12	151%	11/22	33%	$6.02	11
Scallop, descending and inverted	181%	-11%	43%	26%	8	78%	121/307	28%	$2.23	52
Triangle, ascending	169%	-11%	42%	23%	14	97%	74/176	30%	$3.01	40
Triangle, descending	164%	-12%	45%	25%	9	65%	93/195	32%	$1.29	66
Triangle, symmetrical	151%	-12%	31%	17%	37	77%	179/511	26%	$2.36	51
Triple top	159%	-11%	39%	19%	32	96%	269/646	29%	$5.04	17
Rectangle bottom	134%	-12%	16%	10%	71	64%	30/122	20%	$0.07	79
3 falling peaks	204%	-12%	48%	22%	18	98%	261/683	28%	$3.67	32
Roof	76%	-10%	19%	12%	64	96%	27/55	33%	$1.92	58
Roof, inverted	116%	-13%	27%	13%	59	74%	29/64	31%	$3.00	41
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Ascending Triangles: Busted Buy, Non-Busted Sale

The figure shows the setup for this scenario. When price busts the bearish chart pattern (downward breakout from a ascending triangle in a bull market), buy. Sell after a downward breakout from the target chart pattern.

Table 4 shows the performance of busted ascending triangles for the entry and sales after downward breakouts from various bearish chart patterns. A stop loss order was used and priced a penny below the bottom of the ascending triangle (after buying).

A busted ascending triangle has a downward breakout but price drops no more than 10% before reversing and moving above the top of the ascending triangle. Buy when price moves at least a penny above the top of the busted ascending triangle. Sell after price drops at least a penny below the target chart pattern.

For example, buying an ascending triangle with a busted downward breakout in a bull market (the entry price is really the higher of a penny above the top of the triangle or the opening price) and selling after the downward breakout from a broadening bottom shows winners averaging gains of 74%. Losses average 7%, for a net of 5%. Only 56 trades occurred with a win/loss ratio of 14%. This scenario ranks the annualized net gain as 87th among the four tables. If you traded this as a buy-and-hold position, meaning no stops were used, the net gain climbed to 45%. Expectancy was $1.26 per share, ranking 68th where 1 is best.

Table 4: Statistics for Busted Buys, Normal Sales
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	74%	-7%	5%	5%	87	45%	8/48	14%	$1.26	68
Broadening top	109%	-7%	21%	17%	37	62%	20/62	24%	$1.96	57
Broadening formation, right-angled and ascending	84%	-8%	11%	7%	79	15%	10/39	20%	$0.45	77
Broadening formation, right-angled and descending	68%	-8%	8%	5%	87	18%	7/27	21%	-$0.19	80
Broadening wedge, ascending	112%	-9%	37%			68%	11/18	38%
Broadening wedge, descending	83%	-7%	19%	13%	59	32%	12/29	29%	$2.40	50
Bump-and-run reversal top	100%	-8%	28%	20%	25	66%	36/72	33%	$3.58	33
Diamond bottom	220%	-9%	53%			121%	3/8	27%
Diamond top	97%	-9%	15%	13%	59	66%	9/31	23%	-$0.83	85
Adam & Adam double top	164%	-8%	26%	17%	37	102%	59/242	20%	$6.72	9
Adam & Eve double top	80%	-8%	11%	8%	77	70%	23/87	21%	$3.17	38
Eve & Adam double top	100%	-7%	21%	14%	53	65%	43/123	26%	$4.20	29
Eve & Eve double top	113%	-8%	30%	16%	44	68%	48/106	31%	$4.59	23
Falling wedge	39%	-8%	5%			22%	7/17	29%
Head-and-shoulders top	133%	-8%	25%	17%	37	59%	105/348	23%	$2.71	47
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders, complex top	57%	-8%	14%	11%	65	51%	24/47	34%	$0.56	76
Rectangle top	64%	-8%	8%	7%	79	28%	14/51	22%	$2.13	54
Rising wedge	61%	-7%	8%	6%	84	37%	28/98	22%	$1.11	69
Rounding top	38%	-8%	-2%	-3%	92	19%	6/43	12%	-$1.85	91
Ascending scallop	235%	-9%	40%			108%	4/16	20%
Descending scallop	132%	-8%	24%	15%	50	57%	32/107	23%	$3.30	36
Scallop, inverted and ascending	160%	-7%	0%			66%	1/22	4%
Scallop, descending and inverted	121%	-8%	20%	17%	37	50%	20/73	22%	$0.76	73
Triangle, ascending	105%	-8%	13%	14%	53	30%	17/76	18%	$1.07	71
Triangle, descending	127%	-8%	20%	17%	37	20%	14/53	21%	$1.56	63
Triangle, symmetrical	98%	-8%	12%	10%	71	44%	45/190	19%	$1.90	59
Triple bottom	184%	None	184%			184%	1/0	None
Triple top	136%	-8%	24%	15%	50	67%	73/256	22%	$4.78	21
Rectangle bottom	29%	-9%	-3%	-3%	92	-6%	7/36	16%	-$1.91	92
3 falling peaks	142%	-7%	22%	16%	44	66%	54/220	20%	$1.75	61
Roof	143%	-6%	36%			42%	4/10	29%
Roof, inverted	88%	-7%	28%	19%	32	52%	11/19	37%	$11.15	2
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Ascending Triangles: Non-busted Buy, Busted Sale

A bullish chart pattern appears and you buy at the breakout. Continue holding until your selected chart pattern appears. The chart pattern is bullish because it has an upward breakout but then things go wrong. Price reverses. Sell when the stock dips below the bottom of the chart pattern (meaning it busts the upward breakout).

Table 5 shows the performance statistics for this setup (buying a normal ascending triangle and selling only after a busted chart pattern appears). A stop loss order was used and priced a penny below the bottom of the ascending triangle (after buying).

For example, buying a ascending triangle with an upward breakout in a bull market and selling a busted broadening bottom shows winning trades making an average of 103%. Losing trades lost 10%, giving a net of 17%. Because the hold time is often years long, the annualized gain is 11%, giving the setup a rank of 65 (where 1 is best). If you traded this without a stop, the net gain climbed to 33%. Of the stocks I looked at, I found 58 trades with 24% of them winning. Expectancy was a loss of $0.35 per share, ranking 82nd where 1 is best. A negative expectancy means you'll be hard pressed to make money trading this pair often.

Table 5: Statistics for Normal Buy, Busted Sale
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	103%	-10%	17%	11%	65	33%	14/44	24%	-$0.35	82
Broadening top	116%	-10%	27%	16%	44	76%	43/102	30%	$6.23	10
Broadening formation, right-angled and ascending	124%	-12%	33%	14%	53	85%	18/36	33%	$2.46	49
Broadening formation, right-angled and descending	50%	-10%	10%	6%	84	49%	22/43	34%	$1.11	69
Broadening wedge, ascending	67%	-12%	10%			94%	8/20	29%
Broadening wedge, descending	102%	-9%	16%	11%	65	61%	11/38	22%	$0.58	75
Bump-and-run reversal bottom	79%	-9%	12%	7%	79	84%	12/39	24%	-$0.21	81
Cup with handle	43%	-12%	5%			1%	7/15	32%
Diamond bottom	91%	-10%	14%	7%	79	63%	8/26	24%	-$1.22	88
Diamond top	118%	-9%	15%	10%	71	63%	11/48	19%	$1.98	55
Adam & Adam double bottom	181%	-10%	37%	16%	44	120%	62/189	25%	$5.67	14
Adam & Eve double bottom	129%	-11%	23%	11%	65	68%	35/111	24%	$1.98	55
Eve & Adam double bottom	215%	-10%	47%	21%	22	121%	25/75	25%	$6.90	7
Eve & Eve double bottom	83%	-12%	9%	4%	89	53%	22/79	22%	-$0.98	86
Falling wedge	65%	-12%	13%	10%	71	47%	19/40	32%	$0.91	72
Head-and-shoulders bottom	206%	-9%	52%	22%	18	90%	76/190	29%	$5.73	13
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders complex bottom	148%	-9%	39%	16%	44	63%	11/25	31%	$18.30	1
Rectangle top	151%	-10%	43%	21%	22	99%	40/81	33%	$8.16	6
Rising wedge	102%	-11%	28%	14%	53	62%	23/44	34%	-$5.36	93
Round bottom	102%	-11%	28%	14%	53	62%	23/44	34%	-$5.36	93
Rounding top	121%	-13%	25%			55%	7/18	28%
Ascending scallop	151%	-11%	36%	27%	7	89%	32/78	29%	$1.34	65
Descending scallop	50%	-11%	-1%	-1%	91	20%	5/27	16%	-$1.40	89
Scallop, inverted and ascending	133%	-11%	37%	14%	53	86%	43/88	33%	$4.36	26
Scallop, descending and inverted	144%	-8%	47%	23%	14	72%	13/23	36%	$4.25	28
Triangle, ascending	108%	-11%	32%	20%	25	65%	45/80	36%	$4.98	18
Triangle, descending	81%	-13%	16%	11%	65	47%	28/64	30%	$1.64	62
Triangle, symmetrical	166%	-10%	40%	20%	25	93%	98/250	28%	$4.62	22
Triple bottom	182%	-11%	47%	19%	32	84%	88/205	30%	$4.45	25
Rectangle bottom	102%	-10%	23%	11%	65	43%	17/41	29%	$1.77	60
3 rising valleys	203%	-10%	47%	21%	22	98%	54/147	27%	$5.12	16
Roof	132%	-11%	47%			65%	9/13	41%
Roof, inverted	228%	-10%	64%	31%	3	108%	10/22	31%	$10.06	3
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Ascending Triangles: Busted Buy, Busted Sale

Table 6 shows the last combination of trading statistics. It shows busted ascending triangles as the entry signal and various busted chart patterns as the exit signal. Keep in mind that some trades were few. A stop loss order was used and priced a penny below the bottom of the ascending triangle (after buying).

For example, buying and selling a busted broadening top (second data line in the table) made 78% from the winners, lost 9% on the losers for a net gain of 9%. Annualized, it was 10%. The net gain placed the performance of this setup at 73rd, where 1 is best. Removing stops from the trades allowed them to make 44%. Only 43 trades were taken and 21% of them were winners. Expectancy was a loss of $0.65 per share.

Table 6: Statistics for Busted Buys and Sales
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	25%	-7%	-5%			-2%	1/20	5%
Broadening top	78%	-9%	9%	10%	73	44%	9/34	21%	-$0.65	87
Broadening formation, right-angled and ascending	32%	-7%	-4%			22%	1/12	8%
Broadening formation, right-angled and descending	52%	-7%	9%			43%	6/16	27%
Broadening wedge, ascending	69%	-5%	3%			70%	1/8	11%
Broadening wedge, descending	42%	-8%	6%			31%	7/18	28%
Bump-and-run reversal bottom	6%	-7%	-5%			57%	3/15	17%
Cup with handle	None	-13%	-13%			-26%	0/7	0%
Diamond bottom	29%	-7%	-1%			104%	3/14	18%
Diamond top	93%	-7%	12%			53%	5/22	19%
Adam & Adam double bottom	154%	-7%	31%	19%	33	105%	21/69	23%	$8.86	5
Adam & Eve double bottom	61%	-8%	-4%	-5%	97	50%	3/56	5%	-$1.46	93
Eve & Adam double bottom	89%	-6%	10%	6%	87	58%	6/29	17%	$4.94	19
Eve & Eve double bottom	138%	-8%	26%	13%	61	69%	8/26	24%	$10.05	4
Falling wedge	91%	-8%	17%			46%	5/15	25%
Head-and-shoulders bottom	91%	-7%	10%	7%	82	33%	17/83	17%	$1.29	69
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders complex bottom	30%	-6%	-4%			35%	1/13	7%
Rectangle top	85%	-8%	15%	8%	79	58%	9/27	25%	$2.69	51
Rising wedge	30%	-7%	4%			28%	4/10	29%
Round bottom	None	-7%	-7%			79%	0/3	0%
Rounding top	None	-7%	-7%			35%	0/8	0%
Ascending scallop	82%	-9%	28%			71%	6/9	40%
Descending scallop	66%	-7%	11%			90%	2/6	25%
Scallop, inverted and ascending	69%	-7%	10%	10%	73	55%	7/24	23%	$0.63	77
Scallop, descending and inverted	0%	-7%	-6%			-4%	1/12	8%
Triangle, ascending	28%	-8%	0%	0%	93	13%	9/31	23%	-$1.08	90
Triangle, descending	59%	-8%	11%			52%	8/20	29%
Triangle, symmetrical	152%	-7%	30%	22%	18	58%	26/85	23%	$3.45	36
Triple bottom	141%	-7%	24%	16%	45	98%	21/78	21%	$4.64	22
Rectangle bottom	16%	-6%	1%			-1%	5/11	31%
3 rising valleys	59%	-7%	8%	8%	79	36%	11/40	22%	$2.92	46
Roof	42%	-6%	12%			95%	3/5	38%
Roof, inverted	41%	-9%	0%			34%	2/9	18%
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Ascending Triangles: Performance Improvements

Here are a few ideas the data suggested which may improve performance of your pattern pairs trading.

Trend Start: Short, Medium, or Long

Find the trend start for your ascending triangle. Often you can just look at a chart and see where the trend begins. If not, or you want to be sure, then the glossary describes how to find it.

Determine the length from the trend start to the pattern's start: short term (less than 3 months), medium term (3 to 6 months) or long term (more than 6 months).

Table 7 shows the results for the four combinations of busted/non-busted trades and the resulting performance.

Buying patterns with a short-term (up to 3 months) duration from the trend start to the pattern's start results in significantly better performance in most cases.

Notice that busted buy patterns (bottom row in the table) underperform non-busted buys in most cases. Don't trade a busted ascending triangle.

Moving Averages: 50- and 200-Day SMA

Table 7: Short (S) Medium (M) or Long (L) Trend Start and Performance
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	S58% M41% L12%	S53% M35% L8%
Buy busted pattern	S21% M42% L2%	S20% M19% L1%

I checked two moving averages at buy time, 50- and 200-day simple moving averages (not as a crossover setup). I compared the breakout price to the value of the moving average. Table 8 shows the performance of buying or selling busted or non-busted patterns when the breakout price was above (A) or below (B) the 50-day simple moving average (SMA).

Notice that buying non-busted patterns outperformed buying busted ones (compare the two rows). I found that buying a non-busted triangle when the breakout price was above the moving average resulted in better performance (43% versus 30%) than if the buy price was below the SMA. Interpret the other cells as appropriate for your situation.

Table 8: Above (A) Below (B) 50-Day Simple Moving Average
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	A43% B30%	A30% B57%
Buy busted pattern	A21% B16%	A13% B12%

Table 9 shows the results of using a longer moving average, the 200-day. Traders often use this as a proxy for the long-term trend.

In three of four table cells, buying when the breakout price is below the 200-day SMA gives the best result. The exception is when trading non-busted patterns. They perform best when the breakout price is above the moving average.

Selling First Bearish Chart Pattern

The prior discussion assumes you buy a ascending triangle (busted or non-busted) but sell a chart pattern of your choosing, such as a downward breakout from a head-and-shoulders top (you wait for one to appear). What if you sold the first bearish chart pattern which comes along? How would you do?

Table 9: Above (A) Below (B) 200-Day Simple Moving Average
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	A43% B36%	A33% B38%
Buy busted pattern	A13% B45%	A7% B38%

Table 10 shows the results sorted by the type of patterns involved (busted or non-busted). For example, if you buy a non-busted ascending triangle and sell the first non-busted chart pattern which comes along, you'd make 25% on average. Annualized, you'd make 23%. This compares to a 22% annualized gain if you sell a designated pattern (like you waited for a double top before selling, which may or may not be the first bearish chart pattern to come along).

The best results come from buying a non-busted ascending triangle and selling the first non-busted pattern which appears. That combination makes 25% annually, beating the other annualized rates.

The bottom half of the table shows expectancy for the four combinations. Probably due to few trades (63), the highest expectancy is to buy a busted ascending triangle and sell the first busted pattern which appears. The expectancy for that combination is a whopping $9.06 per share.

Bulkowski on Pattern Pairs: Ascending Triangles