As mentioned in a previous blog post, my favorite Chart pattern to trade is the Ascending Triangle. Ascending Triangles form when the price of a stock trades in a range with the resistance remaining unchanged while the support rises. If you draw a line to represent both the support and resistance, you end up with a flat-topped triangle. As price approaches the right apex of this triangle, it tends to break out higher.
The Breakout down not always happen at the apex however, and price can and does break out earlier. In my own observations, breakouts tend to happen most 2/3rds to 3/4th of the way into the pattern.
The trend before the pattern forms can have some affect on the probability of a breakout occurring. If price is trending downwards before this patterns forms, it may signal a trend reversal – but in my opinion, the triangle should be traded more carefully as false breakouts are more likely to occur.
If the pre-pattern trend is bullish however, the odds of the price breaking higher are increased, and the pattern becomes more reliable. Here is an example chart showing a recent ascending Triangles on the chart for Chemours Co (CC):
I entered this trade at $7.77 and sold at $7.94 shortly after the breakout. There was a triangle forming on the daily charts as well, so I felt this formation was very likely to break out.