Ascending Triangles

13 Mar 2018
By Trading Central
Topics: General Education

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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