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Triangles are considered continuation patterns in the field of technical analysis. Triangles, like wedges and pennants, can either be a continuation pattern when confirmed or a strong reversal pattern when not. The three different types of triangles are the symmetrical triangle, the ascending triangle, and the descending triangle. In today’s article, we’ll be looking at ascending and descending triangles.
An ascending triangle pattern in an uptrend is easy to spot and reliable as an entry or exit signal. A visible trend must exist for the triangle to be regarded as a continuation pattern. The ascending triangle pattern is usually created with two trendlines. The top trend line shows the overhead resistance level, while the bottom line shows the market's upward momentum.
When the price breaks above the first trendline at the top of the triangle, it signals the resumption of an uptrend. A second trendline usually consists of a series of higher lows. This configuration of higher lows gives the triangle its bullish characteristics.
Since an ascending triangle is typically thought of as a continuation pattern, it is important whether it appears during an upswing or a downtrend. Depending on which way the price exited the triangle after the breakout, traders often act aggressively to buy or sell the asset.
The descending triangle is most common during downtrends since it typically represents the opposing market trend and usually develops when a security’s price falls but then bounces off the supporting line and rises. The lower trend line in this pattern typically represents a level of flat price support, and the higher trend line represents progressively stronger resistance as the pattern matures.
Descending triangles are quite common among traders since they demonstrate the decline in demand for an asset. If this pattern appears during a long-term uptrend, it is usually taken as a signal of a possible market reversal and trend change. Traders can sell short at the time of the downside breakout, with a stop-loss order placed a bit above the highest price reached during the formation of the triangle.
The formation of ascending triangle patterns usually takes around two months, calculated from the breakout to the apex. In a bull market, descending triangle patterns usually take 55 days to form, while in a bear market, they usually take 62 days.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.