Normally, ascending triangle will see something up to a new high followed by a certain pull back to reach an intermediate support level. Then, a second rally tests the first peak experienced but is then followed by another decline. However, this second decline doesn’t fall as low as the intermediate-term support level. Finally, a third rally normally brings about a brand new high.
By measuring the vertical height of the triangle, you can apply this to the breakout level to work out the technical target. As you will see from the shapes that are formed, this is often called a right-angled triangle. However, not all are symmetrical and before the breakout, you will see a definitive bullish bias with an ascending triangle.
When reviewing ascending triangles, the security is prevented from moving past a certain level by the overhead supply shown by the horizontal line. For example, the price could be prevented from moving any higher because of a large sell order that is taking a little time to process and then execute. Despite the price not being able to rise, the reaction lows continue to trend upwards. Ultimately, this is where the bullish bias comes from because these higher lows show increased buying pressure.
Features of an Ascending Triangle
In order to form the top horizontal line, you have to see at least two reaction highs otherwise you just have one point to measure from.
Again, two reaction lows are also needed for the lower ascending trend line. When you start seeing multiple reaction lows, they must each be higher than the previous reaction low.
All in all, the duration of this process can stretch anywhere from just a few weeks to many months. On average, you will normally find that they last between 1-3 months.
Over time, the pattern will develop and volume will contract. When the upside breakout finally occurs, an expansion of volume would be expected and this will confirm the breakout. Although it isn't necessary, a confirmation is normally preferred.
As the breakout level becomes the ‘support’, it is possible to see a return before a movement begins in earnest.
By measuring the widest distance of the patterns and then using this to apply it to the resistance breakout, you can project a price.