The ascending triangle candlestick chart pattern is characterized by two trendlines – the lower trend line is ascending and formed by a series of higher lows, while the upper trend line is horizontal and provides resistance to the price action. In a textbook ascending triangle scenario, the pattern resolves when the price clearly breaks above the upper trend line.
The ascending triangle is typically analyzed as a bullish pattern that indicates the continuation of an uptrend in the market. However, it can sometimes also resolve as a reversal pattern, with the price breaking out below the lower ascending trend line.
Let’s take a look at an example of what an ascending triangle candlestick pattern looks like.
How to identify an ascending triangle candlestick pattern?
If you’re unsure whether an ascending triangle is forming in the market, you should first consider the established trend in the market. In an ideal scenario, the ascending triangle pattern forms amidst an uptrend in the market.
The next step is to look at the swing highs. There should be at least two swing highs at roughly the same price level, forming the horizontal upper trend line. For the lower trend line, there should be at least two swing lows, with the lows being successively higher. The more touches there are of the ascending triangle’s trend lines, the more reliable the pattern is.
In a textbook example of an ascending triangle, the trading volume gradually decreases as the pattern progresses. Then, when the price breaks above the upper horizontal trend line, there should be an expansion of trading volume to confirm the breakout. Sometimes, there could be a brief re-test of the upper trend line after the price breaks out of the ascending triangle pattern.
To sum it up, here are the most important characteristics of an ascending triangle pattern:
Price trend: The ascending triangle pattern typically forms during an uptrend in the market.
Trend lines: An ascending triangle pattern has a horizontal upper trend line (resistance) and an ascending lower trend line (support)
Highs and lows: In an ascending triangle, there is a series of higher lows along the bottom trend line and a series of highs along the upper trend line.
Price range: The price range becomes increasingly narrow as the ascending triangle pattern progresses.
Trading volume: In a textbook example of an ascending triangle, the trading volume gradually drops as the pattern develops. After the price breaks out above the upper trend line, there should be an expansion of trading volume to confirm the breakout.
How to trade an ascending triangle pattern?
Most often, traders wait for a breakout from the ascending triangle pattern and then enter a long position on the asset.
Taking profits
The most straightforward way to set a take profit level when longing the breakout from an ascending triangle is to measure the distance between the upper trend line and the lows of the ascending triangle pattern.
Setting a stop loss
When longing the upwards breakout from an ascending triangle, the stop loss is typically placed just under the lower trend line.
Here is a visual example of how one might approach a trade when the price breaks above an ascending triangle’s upper trend line. Notice that the two blue lines are the same length.
Ascending triangle FAQs
Now, let’s quickly answer some of the most common questions traders have about the ascending triangle pattern.
Is the ascending triangle pattern bullish or bearish?
The ascending triangle pattern is typically interpreted as bullish. More specifically, the ascending triangle pattern is usually analyzed as signaling a bullish continuation.
Does the ascending triangle pattern signal a trend continuation or reversal?
The ascending triangle pattern is typically analyzed as a bullish continuation pattern that resolves when the price breaks above the upper trend line. However, it can sometimes resolve when the price drops below the lower trend line – in that case, the ascending triangle functions as a bearish reversal pattern.
Does volume matter in an ascending triangle?
Usually, the trading volume declines while the price action is consolidating inside of the ascending triangle pattern. In a textbook example, this is followed by an expansion of trading volume when the price finally breaks above the upper trend line.
How to tell when there’s a breakout from an ascending triangle?
In order to avoid longing false breakouts from the ascending triangle pattern, analyze the trading volume and use indicators such as RSI and MACD to help you determine whether the breakout is real or false.
The bottom line
The ascending triangle pattern is a simple chart analysis pattern that’s not too difficult to trade when it comes to setting take profit and stop loss levels. However, the tricky aspect of trading an ascending triangle is being able to distinguish between real and false breakouts.
If you want to learn more about common candlestick chart patterns, we invite you to take a look at the following articles:
What is a descending triangle pattern and how to trade it?
What is a rising wedge pattern and how to trade it?
What is a falling wedge pattern and how to trade it?
