Chart Trading Tip: Can You Recognize An Ascending Triangle?
The technical definition of an ascending right angle triangle is simply a "rally to a new high followed by a pullback to an intermediate support level, a second rally to test the first peak followed by a second decline to a level higher than the intermediate term support level and finally a rally to fresh new highs on strong volume".
Wow, thats a lot! So what does that actually mean?
In simple terms, it means that buyers and sellers are not sure what the true value of the stock is. As a result, there are noticable higher lows, while resistance keeps the stock from breaking out. If there is strong volume, it doesnt take long for the buyers to be the winners, and the stock breaks out of resistance and moves higher.
These breakouts typically lead to 2%-3% rallies. There often will be a test of support (the former area of resistance). If the share price closes below that, it makes the signal invalid.
Recognizing patterns like these can help you identify the right stocks to buy at the right times.