Ascending Triangles

Ascending  triangles  are  bullish  patterns,  usually  seen  in  an  uptrend  as  a  continuation   pattern,   recognized   by   its unique shape formed with two trend lines: the resistance  line  is  drawn  horizontally  at  a  level  that  has  prevented  the price from going higher while the supporting trend line connects  a  series  of  higher  lows.  In  a  downtrend,  these  right- angle   triangles   can   form   a   reversal   pattern.   A   common   target   price   can   be   based   on   the   height   of   the   triangle.

 

ADAPTED OPTION STRATEGY: BULL CALL SPREAD

As the upside potential is limited by the 2800.00 measured move of the pattern, a bull spread allows you to lower the cost of the strategy (in comparison to a straight long call) by selling a call out of the money. As a result, the strategy consists of the simultaneous purchase of a call with a strike at 2745.00 and selling a call with a Strike at 2700.00 (measured move of the ascending triangle pattern).

ASCENDING TRIANGLES: ES H18 ON MAR 2018

BULL CALL SPREAD: Leg 1

Trading Symbol ES H8
Option Type CALL
Option Strategy LONG
Strike 2745.00

BULL CALL SPREAD: Leg 2

Trading Symbol ES H8
Option Type CALL
Option Strategy SHORT
Strike 2700.00

ACTUAL OUTCOME

Trading Symbol ES H8
Strategy LONG
Entry Point 2730.00
Target 2800.00
Stop Loss 2684.00
Contract Expiry MAR 2018

POTENTIAL GAIN PER CONTRACT

Atargetof 2800.00 is calculated by anticipating a measured move between the triangle’s low and high and then projecting this range to the upside from where the prices broke to the upside. Another idea is to take full or partial profit at the next major resistance level set at 2760.00.

 

POTENTIAL DOWNSIDE PER CONTRACT

Once the position is open, if prices fall below the 2684.00 support level the futures position should be closed as the strategy failed to materialize.

Ascending Triangles Happening Now

Euro: 6E

Corn: C


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