| When You Learn Technical Analysis, Don't Forget The Ascending Continuation Triangle |
 |
 |
 |
| Written by Chris Blanchet |
| Saturday, 18 July 2009 09:34 |
|
Although we have already looked at a Classic Pattern in the Learn Technical Analysis Free series, another important pattern to understand early on is the Ascending Continuation Triangle. This pattern is formed by two converging trendlines -- a horizontal upper line that scrapes along two steady "highs" of a trading range and an increasing lower line that follows two higher lows of the same range.
Although we have already looked at a Classic Pattern in the Learn Technical Analysis Free series, another important pattern to understand early on is the Ascending Continuation Triangle. This pattern is formed by two converging trendlines -- a horizontal upper line that scrapes along two steady "highs" of a trading range and an increasing lower line that follows two higher lows of the same range. 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 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 If the pattern's prices come close to or touch the 200-day Moving Average, the pattern is stronger and investors should consider it more reliable than if the prices were not close. 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. 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. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. 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. |