Talking Technicals with Christian Tharp, CMT – Chart Patterns

For all practical purposes, technical analysis is what I do as a CMT. I analyze stock charts not just because it provides me with my livelihood, but also because I truly enjoy the hunt for a nice looking chart! Finding a great stock chart that sends a message honestly feels like finding money on my computer screen. When I look at a stock chart I simply see trends and patterns that provide me with buy & sell points.

Ascending Triangle

An ascending triangle is easily recognizable by the distinct shape created by the combination of an upward sloping trendline and a horizontal resistance.

Although ascending triangles are typically considered to be bullish chart patterns, they can just as easily break lower as higher. Traders will enter into long positions when the price of a stock breaks above the top resistance, or enter a short position if the stock breaks below the trendline.

Ascending triangles are generally considered to be continuation patterns, meaning that they usually form as a stock consolidates within an uptrend. Think of it as a pause before continuing higher. Once the breakout occurs, buyers will commonly send the price of the asset higher, usually on higher volume. As stated earlier, traders must always remember that these patterns can form within downtrends and can break lower instead of higher. The key to the trade is the direction of the breakout.

A great example of this formation is found on a stock I’ve been watching – VECO (Veeco Instruments, Inc.). By looking at the chart you can see that VECO is currently forming an ascending triangle. The company is within the technology sector and semiconductor equipment & materials industry.

As you can see from my notations (pink), VECO is forming a very nice ascending triangle pattern. At some point, the stock will have to break one direction or the other, which is when a trader would want to consider a trade. It’s like money on the screen, right?

Before making any trading decision, remember to consider which side of the trade you believe gives you the highest probability of success. For example, analyze the overall market to see which direction it is trending. Making this type of decision ahead of time will help you decide which side of the trade you believe gives you the best opportunities. Regardless of your strategy, or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.

Good luck and great profits!