Art's Charts

Anatomy of a Classic a Bullish Continuation Pattern - And a Live Example

 | 

Bullish continuation patterns are my favorite patterns when it comes to stocks and ETFs. As the name suggests, bullish continuation patterns, when confirmed, signal a continuation of the prior trend. Furthermore, because it is a "bullish" continuation, it means the prior trend was up and that trend is now continuing. With the S&P 500 spending some 73% of its time above the 200-day SMA over the last 20 years, it is much easier to make money on uptrends and bullish patterns than downtrends and bearish patterns.

Today's bullish continuation pattern is the Ascending Triangle. This is a classic pattern that forms with relatively equal highs marking overhead supply and higher lows marking demand points. The equal highs mark a resistance level where demand was not strong enough to overpower supply. The higher lows, however, show demand coming in at higher levels. In other words, the dips are becoming shallower as demand increases at higher prices. A break above resistance confirms the pattern because is signals a victory for demand.

The chart above shows an Ascending Triangle taking shape in the S&P 500 SPDR (SPY) over the last three months. The higher low in October shows demand coming it at higher prices (above the August lows). The equal highs mark a zone of overhead supply in the 301 area. A break above this level would confirm the pattern and target a move to the 320 area. Note that the height of the pattern is added to the breakout level for an upside target (301 - 281 = 20, 301 + 20 = 321).

There are at least three more Ascending Triangles forming in some key ETFs. In addition, there are a number of bullish triangles and these patterns were highlighted in today's report at TrendInvestorPro.com. This report comes with a PDF ChartBook that features 60 ETFs ranked by chart performance.






Choose a Strategy, Develop a Plan and Follow a Process

Arthur Hill, CMT

Chief Technical Strategist, TrendInvestorPro.com

Author, Define the Trend and Trade the Trend


Want to stay up to date with Arthur's latest market insights?

– Follow @ArthurHill on Twitter

– Subscribe to Art's Charts

Announcement from the Author

{{ announcement.content }}

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
Subscribe to Art's Charts to be notified whenever a new post is added to this blog!
comments powered by Disqus