Getting Technical: 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 1.137 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 1.0950 and selling a call with a Strike at 1.14 (measured move of the ascending triangle pattern).

BULL CALL SPREAD: Leg 1

Trading Symbol EUU U7
Option Type CALL
Option Strategy LONG

BULL CALL SPREAD: Leg 2

Trading Symbol EUU U7
Option Type CALL
Option Strategy SELL
Strike 1.140

ADAPTIVE FUTURES STRATEGY

Trading Symbol 6E U7
Strategy LONG
Entry Point 1.0953
Target 1.1370
Stop Loss 1.0600
Contract Expiry Sept 2017

ASCENDING TRIANGLES: 6E U7 SEPT 17

ACTUAL OUTCOME

POTENTIAL GAIN PER CONTRACT

A target of 1.137 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 euro broke to the upside. Another idea is to take full or partial profit at the next major resistance level set at 1.116.

POTENTIAL DOWNSIDE PER CONTRACT

Once the position is open, if prices fall below the 1.06 support level the futures position should be closed as the strategy failed to materialize.

Ascending Triangles Happening Now

Crude Oil: CL

Palladium: PA


Copyright TRADING CENTRAL
The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects TRADING CENTRAL current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.

Services in the U.S. are offered through TRADING CENTRAL Americas, Inc.

TRADING CENTRAL is not registered in France as an Investment Services Provider but complies with the following rules and directives, including:
- General Regulation Handbook of the AMF, Book III, Title III, Chapter VII "Investment Analysts Not Associated with an Investment Services Provider"
- EU Commission Directive 2006/73 dated 10 August 2006, Articles 24 and 25
- EU Commission Directive 2004/39 dated 21 April 2004
- EU Commission Directive 2003/125 dated 22 December 2003

This message is intended for recipient only and not for further distribution without the consent of TRADING CENTRAL. Although TRADING CENTRAL attempts to sweep e-mail and attachments for viruses, it does not guarantee that either are virus-free and accepts no liability for any damage sustained as a result of viruses.

About Trading Central

Trading Central is a leading provider of independent investment research to financial market professionals, specialising in the field of technical analysis. Founded in 1999, Trading Central now has offices across North America, Europe and Asia, providing research to over 200 leading investment banks, FCMs, hedge funds, brokers and exchanges in over 45 countries.