This page describes the ascending triangle pattern of the Elliott wave principle, how price moves not in a straight line but in a series of rises and retracements.
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The figure to the right shows what an ascending triangle looks like in a bull market. The ascending triangle is a region of horizontal price movement, a consolidation of a prior move, and it is composed of "threes." That means each of the A-B-C-D-E waves have three subwaves. I labeled the B subwaves with red numbers, 1, 2, and 3 as an example. Expect volume and volatility to recede as the pattern moves toward the breakout, but this is not a requirement.
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In an ascending triangle, the top of the triangle bumps up against overhead resistance (the horizontal red line), and the bottom of the triangle slopes upward following another red trendline.
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An ascending triangle in a bear market is not an inverted picture of a bull market triangle. Rather, the chart to the right shows an ascending triangle with the waves inverted while still obeying the flat top and up sloping bottom trendlines. The A-B-C-D-E waves subdivide into threes, forming a 3-3-3-3-3 configuration.
On rare occasions, an ascending triangle can nest inside an ascending triangle. You see this when the wave count exceeds the A-B-C-D-E format, forming a nine wave pattern. Also, Frost and Prechter say that when price reaches the apex of the triangle, expect the market to turn.
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Rules
The ascending triangle has rules that govern its shape. They are listed here.
The tops of the waves peak near the same price, following a horizontal trendline. The bottoms of the waves generally follow an up-sloping trendline. Five waves compose the ascending triangle (A-B-C-D-E), unless extended. Each of the A-B-C-D-E waves are composed of three subwaves, so it has a 3-3-3-3-3 configuration. Volume and volatility tend to recede over the life of the pattern, but this is not a requirement.
-- Thomas Bulkowski
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I have a blog that I post to on a daily basis (that is, days when the markets are open):http://thepatternsite.com/Blog.html
Monday's are reserved for "Mental Monday" which is the psychology of trading
Tuesday's are "Tutorial Tuesday's" where I present new research or review old techniques.
Wednesday's are "What's Hot Wednesdays" which is a statistical review of the markets
Thursday's is a free for all, meaning I usually post market direction note here.
Friday's are "Patterns for the weekend" where I list the chart patterns that have appeared during the week on stocks that I follow.
You are welcome to syndicate any of those blog entries providing my copyright notice accompanies the text. You are also welcome to search through the archives (http://thepatternsite.com/Archives.html) to find any material you'd like, again, with a copyright notice attached.
Tom
Reprinted with permission
This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.
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