Could you please give me a clue as to what an "ascending or descending triangle" refers to? (July 10, 2004)
An ascending triangle forms when prices, in tracing their daily or monthly pattern, move up and down between support and resistance to form a "shape" that looks like a triangle or a pie wedge. The point or tip of this shape is on the right side of the pattern, as prices become compressed between support and resistance. Resistance is the high prices the stock cannot yet break through (forming a horizontal "ceiling"), and support is an up trendline that develops as the low prices --on the pattern dips-- move higher and higher. This is what gives the pattern its triangle shape with the point or tip at the right side. Prices become compressed in this part of the pattern.
The stock traces this pattern as it hits a high and moves back down, finding support and bouncing back up again to that previous high. Typically it will move back down again, finding the support once more, then bouncing back up to hit the ceiling of resistance. This is the resistance the stock has to break through, and one of the reasons we like this pattern so much is because breakouts from such patterns can be strong. The pattern gets squeezed into the tip of the triangle and upon breakout can explode upward. Interestingly, there is an opposite pattern called a descending triangle, which can result in the same kind of move downward. We like to play those, too.
You can look at a chart of TRBS in April through June 2004 and see a triangle form with the lows moving up the 50 day EMA with a constant top near 44. The stock make a strong volume breakout as the pattern pinched off.
Our stock seminars go into more detail about this and other technical patterns. Check them out if you are interested. The new, updated version will be out at the end of summer!
|Previous Page||Next Page|