Learn Technical Analysis Starting With The Ascending Continuation Triangle
While another Classic Pattern has already been discussed in our Learn Technical Analysis Free series, we should also be introduced to the Ascending Continuation Triangle pattern rather early. This Classic Pattern will take shape when two high levels of a trading range are connected by a horizontal line (indicating a resistance level) and a rising line that are joined by two higher lows of that same range (please visit the site for a visual).
The importance of the Ascending Continuation Triangle as it relates to investors who want to learn technical analysis is that it is a bullish signal. Typically, it is a short-term pattern that forms between one and three months. This allows for quick gains and also for lesser losses if the pattern was false.
When starting to learn technical analysis, it is usually a little more difficult to have the patience needed to confirm such a pattern. However, here are a few tips to consider as the pattern starts to take shape.
Volume
This is considered one of the most important factors when confirming this pattern. What investors need to see is that volume diminishes as the pattern takes shape and then spikes at breakout (pattern confirmation). Conversely, if there is no spike at breakout, then the pattern is considered less reliable or even false.
Moving Average
When prices are close to or touch the 200-day moving average, the pattern is considered to have greater reliability.
Duration
Duration also needs to considered, something many investors who have just started to learn technical analysis tend to forget. Break-out will happen when the price penetrates the upper horizontal line (e.g. the resistance line), but this occurrence should happen long before the pattern reaches the apex, or right-side tip of the triangle. Generally speaking, this break-out should occur between three-quarters to two-thirds of the way along upper line.
As far as providing a fundamental explanation for why this pattern occurs, investors should consider a company or a institutional investor who wants to offload a large quantity of stock at a pre-determined price level. As the stock price reaches such a level, buyers will draw on the large supply and will consequently push the price down, forming something of a resistance level. However, as prices bounce back and the supply is depleted, the price will shoot through the previous resistance levels to new highs. This is exactly what we like to see when we start to learn technical analysis -- the perfect end to a classic pattern. - 23218
The importance of the Ascending Continuation Triangle as it relates to investors who want to learn technical analysis is that it is a bullish signal. Typically, it is a short-term pattern that forms between one and three months. This allows for quick gains and also for lesser losses if the pattern was false.
When starting to learn technical analysis, it is usually a little more difficult to have the patience needed to confirm such a pattern. However, here are a few tips to consider as the pattern starts to take shape.
Volume
This is considered one of the most important factors when confirming this pattern. What investors need to see is that volume diminishes as the pattern takes shape and then spikes at breakout (pattern confirmation). Conversely, if there is no spike at breakout, then the pattern is considered less reliable or even false.
Moving Average
When prices are close to or touch the 200-day moving average, the pattern is considered to have greater reliability.
Duration
Duration also needs to considered, something many investors who have just started to learn technical analysis tend to forget. Break-out will happen when the price penetrates the upper horizontal line (e.g. the resistance line), but this occurrence should happen long before the pattern reaches the apex, or right-side tip of the triangle. Generally speaking, this break-out should occur between three-quarters to two-thirds of the way along upper line.
As far as providing a fundamental explanation for why this pattern occurs, investors should consider a company or a institutional investor who wants to offload a large quantity of stock at a pre-determined price level. As the stock price reaches such a level, buyers will draw on the large supply and will consequently push the price down, forming something of a resistance level. However, as prices bounce back and the supply is depleted, the price will shoot through the previous resistance levels to new highs. This is exactly what we like to see when we start to learn technical analysis -- the perfect end to a classic pattern. - 23218
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posted by X - Men @ 2:31 AM
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