An ascending triangle is a type of triangle chart pattern that occurs when there is a resistance level and a slope of higher lows.
What happens during this time is that there is a certain level that the buyers cannot seem to exceed.
However, they are gradually starting to push the price up as evidenced by the higher lows.
In the chart above, you can see that the buyers are starting to gain strength because they are making higher lows.
They keep putting pressure on that resistance level and as a result, a breakout is bound to happen.
Now the question is, “Which direction will it go?
Will the buyers be able to break that level or will the resistance be too strong?”
Many charting books will tell you that in most cases, the buyers will win this battle and the price will break out past the resistance.
However, it has been our experience that this is not always the case.
Sometimes the resistance level is too strong, and there is simply not enough buying power to push it through.
Most of the time, the price will, in fact, go up.
The point we are trying to make is that you should not be obsessed with which direction the price goes, but you should be ready for movement in EITHER direction.
In this case, we would set an entry order above the resistance line and below the slope of the higher lows.
In this scenario, the buyers lost the battle and the price proceeded to dive!
You can see that the drop was approximately the same distance as the height of the triangle formation.
If we set our short order below the bottom of the triangle, we could’ve caught some pips off that dive.
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