A right-angled triangle is distinguished by the fact that one of its boundaries is virtually horizontal while the other slants towards it. In the case of a right-angled ascending triangle, the top is horizontal and the bottom line slopes upward to converge somewhere at the right side of the chart.
This formation is classically described as a rising stock that runs into a big seller at a particular or a pre-determined price, but the demand remains unsatiated and is not overwhelmed by the selling pressure. In such a scenario there could be a rapid advance.
There has to be continuous demand even at higher levels or the relevancy of an ascending triangle is lost. Activity tends to cool off as prices move towards the apex - in the case of an ascending triangle volume will pick up on each rally and there would be a decline in volume on every fall within the pattern.
For a valid upside breakout to materialise from a right-angled ascending triangle one needs to start with the basic 3 per cent, three-day away rule in terms of closing above the horizontal supply line (outer boundary of the triangle formation). A point to note is the mandatory increase in the volume accompanying the upside breakout.
The best breakout from a symmetrical triangle formation is between half and three fourths of the horizontal distance from the base (read as the left side corner) to the apex. Theory says any breakout beyond three fourths of the pattern could be a weak move and could fizzle.
Two price reversals on either side are needed to plot a symmetrical triangle formation and out of these four, the first two (read as the first reversal on either side) matter.
The difference between the two points is measured and added to the point of breakout which becomes a minimum measuring criteria in terms of an expected price target for the pattern.
