Lesson 6B: Breakout Patterns - Ascending Triangle (Bullish)Hello Friends,
Welcome to the series of Lesson 6. In Lesson 6B, we are going to learn the Ascending Triangle breakout pattern. This is more of a continuation pattern rather than the reversal pattern as oppose to the Falling Wedge pattern that we learned in Lesson 6A.
Lets get straight into the topic. Please be very careful.
We will be referring to the chart above or below to get a better understanding of the topic:
What is Ascending Triangle Pattern?
Ascending Triangle is a bullish continuation pattern, which we quite often see in the crypto world. When a coin is inside the Ascending Triangle, it means it is currently being accumulated, before it breaks out.
Formation:
Lets go back to some Mathematics. We all studied what is a Right Angle Triangle correct? If we look closely at the chart above, we see that it is forming a right angle triangle.
There are two lines to this formation, one is the resistance line, which is horizontal as you can clearly see. The second is the support line which is ascending as you see and it moves up with the price (basically it is inclined moving up as we go from left to right).
The horizontal (resistance) line is formed by 2 or more equal reaction highs touching the horizontal.
The ascending (support) line is formed by 2 or more higher lows touching the ascending support line.
The Rules:
So obviously, you won't just draw an ascending triangle, and think that this is a bullish pattern. There are a few things you need to confirm before making an entry into the coin. Lets look into it.
You must be wondering, how many times the price candle has to touch the resistance line or the support line to consider this pattern valid? Here is the answer:
For the Horizontal (Resistance Line), the price candle has to touch at least TWO or more times to consider a part of this pattern valid. Notice in the chart how the price pull after touching the resistance line FOUR times.
For the Ascending (Support Line), the price candle also has to touch at least TWO or more times to consider this pattern valid. Notice how in the chart the price candle bounces after touching the support line THREE times.
Note (IMPORTANT) :
For the Resistance Line, it is preferred that the candles touching it are equal or doesn't differ in height by too much difference. Usually I only consider the patterns for which the reactions highs are equal for this pattern.
For the Support Line, it is preferred that we have reaction lows as Higher Lows. If we see a reaction low lower than or equal to the previous reaction low, this pattern will be INVALID.
Also note from the chart that there has to be a little distance between the reaction highs, or reaction lows, as you can see in the chart. Just a little is fine.
Since crypto is very volatile, the length of time this pattern occurs doesn't really matter much, but the longer the length the stronger the patter. It's that simple. I stick to 30m or more for this pattern.
I am sure you guys are understanding this really well, as this pattern is very simple to understand or do I make it simple to understand? :P
Lets take a look at the breakout setup.
Continue reading below.....
Lesson6
Lesson 6A - Breakout Patterns - Falling Wedge (Bullish)Welcome back to Lesson 6 traders. I have something interesting for y'all in this lesson. This lesson is going to be a series on Breakout Patterns. I will be posting one breakout pattern at a time, so it is easy to understand, and clean enough to follow. The following lessons are going to be posted in lesser time. So in the Lesson 6 series, since there will be multiple topics for breakout patterns, I will be splitting them into Lesson 6A, 6B, 6C and so on....
In Lesson 6A, we will be going over the Falling Wedge breakout pattern. We will be looking over the criteria to qualify for this pattern, and what to look for in order to get a breakout confirmation.
Falling Wedge is usually a bullish pattern most of the time. It usually is wide from the top and contracts as it moves down to the lower price levels.
There are certain criteria for a falling wedge to qualify to be a reversal or a breakout pattern. Lets follow the chart above in order to get a good understanding of what I am taking about here.
Actually I will post the above chart right here for you so it can be easier for you:
So in the chart above we can clearly see TWO falling wedges, they both are for the same breakout that happened in TRX, so you can refer to any of them. We will go over the step again as a summary, but let us first go over the detail so you get a clear view on this.
Whenever I am looking for a falling wedge patterns, I make sure the resistance line, which is the upper line of the falling wedge connects minimum of 3 candle sticks. Sometimes we can get away with 2 candle sticks, but when we have 3 connected candle sticks, meaning the price has pulled back after touching the resistance line at least 3 times, we can check off one of the criteria for a falling wedge.
Now for the support line, which is the lower line of the falling wedge should at least have a minimum of 2 candle sticks touching the line, meaning the price has bounce at least 2 times after touching the support (lower) line of the falling wedge. This is considered the second criteria for the falling wedge. This just means that you have a close to accurate enough data to consider this as a reversal pattern for the selected time frame you are into.
If we look closely at the chart, for the resistance line, the price has pulled back after touching it about 4 times, and 3 times for the blue support line. Notice how the price candles have not closed outside of the resistance or the support line. This is really important for a valid pattern. Since we have BTC movement effecting the altcoin prices, we can ignore the candles closing just a little outside the resistance/support lines, but mostly the price should be moving inside the wedge.
Another criteria for a falling wedge is that, it starts out wide, and the wedge contracts as seen in the chart, as the price moves lower.
Once we have these three criteria lined up, we have a confirmation that the price pattern is currently moving in a falling wedge. So now, all we need to do is wait for the breakout. Remember, this is very very important. In order to confirm this reversal, the price must breakout from the falling wedge to the upwards. If it breaks towards the bottom (support line), this pattern gets invalid.
As we see in the chart above, the candle breaks out of the falling wedge, and the price start moving rapidly upwards. Thus, we can say that the falling wedge on the chart above is a valid falling wedge pattern.
You must have understood this pattern by now. Make sure you do by reading what I have written above, and looking at the chart at the same time.
Continue reading below......
