DalmiaSug: Buy at 106-107: Ascending Triangle BreakoutDALMIASUG Buy at 106-107
Stop-loss: 93.85
Target: 138
Risk 11.50% & Reward 30%
RR Ratio 1 : 2.63
Ascending Triangle - Continuation Pattern
With its “flat-topped” shape, the ascending triangle indicates that buyers are more aggressive than sellers. The ascending triangle forms because of a supply of shares available at a fixed price. When the supply depletes, the shares quickly breakout from the flat-topped trendline and move higher.
IDENTIFICATION GUIDELINES
1. The Shape of The Triangle – Two price trendlines, upper one horizontal, and the bottom one rising upwards form a triangle pattern. The two lines join at the triangle apex.
2. Formation of The Triangle – Price Should rise to hit the upper horizontal trendline at least twice or two highs then fall away. Price should fall to the lower rising trendline at least twice or two lows then rise. The upper one, horizontal top trendline need not be completely horizontal but usually is.
3. Duration of The Triangle – The triangle is a relatively short-term pattern. It may take up to one month to form and it usually forms in less than three months.
4. Volume inside The Triangle – Volumes tends to be slightly higher on bounces and lighter on dips. Usually, the volume is low just before the breakout.
5. Pre-mature or False Breakout – Because volume is usually low just before the breakout or at the apex of the triangle formation, it takes very little activity to bring about an erratic and false movement in price, talking the price outside of triangles. Typically, a false move corrects itself within a week or so. The pattern immediately will be suspicious without an accompanying high volume breakout. If there’s no pick up in volume around the breakout, investors should be wary.
6. Breakout – Price closing above the horizontal line with high volumes confirms a breakout. Price will move up and away from the formation. Volume is heavy and continues to be heavy for several days.
HOW TO TRADE AN ASCENDING TRIANGLE
Trading Rules.
1. Entry – Buy the stock the day after a breakout. If you miss it, wait for the throwback then buy when price resumes the breakout direction after the throwback completes. When you missed and, If you Don’t Get A Throwback too then Don’t Chase The Stock Price, Believe Me, It Certainly Won’t Be The Last Ascending Triangle Ever Happened.
2. Price Target – The technical target is derived by computing the vertical height of the triangle at the start of a formation. Add the result to the price of the horizontal trendline. The Derived sum is the minimum price target.
3. Taking Profit – For short-term traders, sell when the price reaches near to the price target as computed above. For intermediate and long-term traders, hold the stock as per your risk & capital management applied before entering into a trade.
4. Stoploss – usually, price closing below rising lower trendline is a stop-loss. But very often, The gap between both Trendline is very high. So it won’t be suitable for a good risk-reward ratio. Without a Good Risk to Reward ratio in trading or investing can never create a wealth. Always pay close attention to RR ratio. It Must Be above 1:2.
