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Start With The Ascending Continuation Triangle When You Learn Technical Analysis

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Total views: 4 | Word Count: 422 | Date: Fri, 24 Jul 2009 | 0 comments

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).

Investors who want to learn technical analysis are wise to understand the Ascending Continuation Triangle as it is normally a short-term pattern that takes form over one to three months. This allows for quick gains if the pattern is accurate and minimal losses if it is false.

Investors who have just begun to learn technical analysis will actually find it more difficult to remain patient as they confirm the pattern than it is to spot the pattern. For confirmation, investors should look for the following.

Volume

This is probably the most important confirming factor when it comes to this pattern. As the pattern takes shape, volume should be diminishing. When the pattern is confirmed and there is a breakout, volume should spike. Lacking this volume spike at breakout, investors should no consider the pattern reliable and should steer away from making trade decisions based on it.

200-day Moving Average

The Moving Average should also be taken into consideration. If the pattern's prices touch or come close to the 200-day moving average, then the pattern is considered strong.

Duration

Duration is also an important consideration. Many people who are just starting to learn technical analysis will forget this. Ideally, the break-out should occur long before the pattern reaches the right tip of the triangle. In fact, investors should expect break-out to occur roughly three-quarters to two-thirds of the way along that upper line.

For investors seeking an explanation as to who this pattern occurs from a fundamental basis, consider a company or large shareholder who wants to sell only at a predetermined price. When the price reaches such levels, the supply of stock will dwindle and push the price down. Until that supply is depleted, this price level will form a resistance line (the upper, horizontal line). However, once this supply is exhausted, the price will break out, which is where people who want to learn technical analysis will see confirmation of such a pattern.

About the Author

For investors who want to learn technical analysis free and receive two free stock picks every week that exemplify the signals discussed in the Series, visit Online Trader Today.com.