How Spotting This Simple Pattern Could Score You 44% Gains
What if I told you that spotting a simple price pattern on a stock chart could give you 44% gains in just a single week? I realize that sounds crazy, but bear with me.
You see, I’m not talking hypotheticals here – I want to show you how a technical analysis pattern called an “ascending triangle” led a small group of readers to those gains. Better yet, I’ll show you where you can download a set of complimentary “Trading Cheat Sheets” that reveal nine more profitable patterns you can start using today. More on that in a bit…
First, let’s get back to that ascending triangle.
Here’s what it looks like:
The chart above is a price chart of an actual stock (I’ve cut the name and price information out because it’s not important yet). The two lines you see on that chart form the ascending triangle pattern: the horizontal resistance level above shares, and the uptrending support level that comes in below shares.
See why it’s called an ascending triangle?
Basically, as shares bounce in between those two lines, they’re getting squeezed closer and closer to a “breakout” above that resistance level. When that push above resistance happens, we’ve got a buy signal on our hands.
Of course, you may be wondering how a couple of lines on a chart can tell us anything about when to buy or sell. I don’t blame you. That’s why it’s best to think about the pattern in terms of what those lines represent – after all, when it comes down to it, the only two forces that impact a stock’s price are supply and demand (how much a buyer is willing to pay, and how much a seller is willing to take).
On the chart, resistance is a price level above which there’s a glut of supply of shares. In other words, it’s a place where sellers have previously been more eager to sell and take gains than buyers were to buy. That’s why it’s acted like a sort of “price ceiling” for the stock in the chart above.
Below it, support is the opposite. It’s a price level where buyers are more eager to buy than sellers are to part with shares. Since support is climbing in an ascending triangle pattern, we know that buyers are in control below resistance. When the breakout happens, it’s a signal to investors that the glut of supply that’s previously acted as a ceiling has been taken out by increasingly eager buyers (sellers can hover above resistance forever, after all). Without that ceiling overhead, there’s nothing standing in the way of higher prices.
That’s what we call a “high probability trade.”
Yes, the ascending triangle pattern tells us all of that with just a glance at a chart.
So, what does it look like in action? The chart below is Raptor Pharmaceutical Corp. (NASDAQ:RPTP), a tiny pharmaceutical company:
It’s the exact chart that I sent to my small group of STORM Signals readers back in late November. Raptor’s price action was a bit messy, but you can still spot the horizontal resistance at $5 and the uptrending support. That made this pattern an ascending triangle, and meant that a push above $5 was a buy signal…
Sure enough, Raptor pushed above $5 on November 30. I told my readers to buy. Then, a week later, on December 7, I told them to sell. It was a quick 13.4% gain in shares, and a 44% gain for readers who followed my advice on a more powerful way to play the stock.
The ascending triangle isn’t difficult to spot, but it can obviously lead to some pretty huge, quick gains.
Happy trading,
Jonas Elmerraji
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Jonas Elmerraji
Jonas Elmerraji, CMT, is the co-editor of STORM Signals and Penny Stock Fortunes, and a contributor to Agora Financial’s Trend Playbook. Jonas got his start on the fundamental side of the market, poring over financial statements and valuations to find sound investments – today, he specializes in blending fundamental and technical analysis. Jonas is a senior contributor to TheStreet.com, and has been featured as an investment expert in Forbes, Investors Business Daily, and CNBC.com among others.
Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.
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