Five Profitable Patterns

Profitable Pattern Number Two
Ascending and Descending Triangles: The Traditional Bull and Bear

When you notice a stock has a series of increasing troughs and the price is unable to break through a price barrier, chances are you are witnessing the birth of an ascending triangle pattern.

Ascending Triangle Pattern Confirm your ascending triangle pattern by drawing a horizontal line tracing the upper price barrier and a diagonal line tracing the series of ascending troughs.

The descending triangle is the bearish counterpart to the ascending triangle.

Descending Triangle Pattern Confirm your descending triangle by drawing a horizontal line tracing the lower price barrier and a diagonal line tracing the series of descending troughs.

The ascending and descending patterns indicate a stock is increasing or decreasing in demand. The stock meets a level of support or resistance (the horizontal trendline) several times before breaking out and continuing in the direction of the developing up or down pattern.

How to Profit from Ascending and Descending Triangles

Ascending and descending triangles are short-term investor favorites, because the trends allow short-term traders to earn from the same sharp price increase that long-term investors have been waiting for. Rather than holding on to a stock for months or years before you finally see a big payday, you can buy and hold for only a period of days and reap in the same monster returns as the long-time stock owners.

As with many of our favorite patterns, when you learn to identify ascending and descending triangles, you can profit from upwards or downwards breakouts. That way, you’ll earn a healthy profit regardless of where the market is going.

Watch For:

• An ascending or descending pattern forming over three to four weeks.

Set Your Target Price:

For ascending and descending triangles, sell your stock at a target price of:

• Entry price plus the pattern’s height for an upward breakout.
• Entry price minus the pattern’s height for a downward breakout.

ChartAdvisor Ascending and Descending Triangles in Action

Ascending and descending triangles are some of our most popular patterns, because their features are so clear and the breakouts are almost always fast and furious.

Flanders Corp (FLDR) earned our readers 28% in 18 days. Dominos Pizza (DPZ) jumped 12% in 20 days after we pinpointed the breakout point on June 13, 2005.

Another of our winning picks in 2005, Dril-Quip Inc (DRQ) jumped 12% in just 6 days. On Boyd Gaming (BYD), investors following our pick earned a whopping 29% in 35 days.

Our readers earned 29% in 35 days on the BYD ascending triangle pattern.