Bullish Reversal Patterns/bases: The earliest entry point for a trend follower.
The ASCENDING TRIANGLE BASE
Everything is cyclical.
Every (or shall I say most) uptrend reverse (Bearish reversal).
And so does every downtrend (Bullish Reversal).
Most of these reversals are brought about by reversal bases (most take the shape of geometrical patterns and hence are named after them).
Some rare reversals don’t form reversal bases. Post-Covid recovery is a major example.
Identifying these bases, and their types as a trader can give you a huge advantage and facilitate a perfect entry.
This will allow you to ride the entirety of the trend from a very early stage.
Today, I will discuss all the possible reversal bases that can occur during a bullish trend reversal.
I will discuss the Ascending Triangle in detail.
And look at some examples.
Bullish Reversal Base types:
There are 7 types of Bullish reversal patterns/bases. All of them reverse a downtrend to an uptrend.
Ascending Triangle.
Symmetrical Triangle.
Double Bottom.
Triple Bottom.
Rectangle.
inverse Head & Shoulder.
Rounding Bottom.
The difference is created by the price levels at which the swing highs and lows occur and their number (which tells us about the supply-demand equation playing out in the stock/instrument).
The occurrence of key volume characteristics inside the base increases or decreases the probability of the reversal.
We will be looking at each of these patterns/bases one by one in detail, starting with the Ascending triangle.
Ascending Triangle base:
It is the most bullish of all bullish reversal patterns.
(PS: Ascending Triangles can also be continuation bases)
There are at least 2 clear swing highs at a horizontal level. This makes the resistance.
Whereas the swing lows inch up higher forming a rising trendline support.
Rising swing lows mean rising demand(buy zone) meaning increased demand in the stock, hence the most bullish.
This rising demand eventually pips supply, propelling the stock to break out and start an uptrend.
Volume signature:
Volumes should dry up from left to right on the downlegs.
The breakout must be accompanied by relatively high volumes for a higher probability of follow-through.
Breakout should come around 2/3rd of the length of the Ascending triangle (definitely before the apex).
The nearer a breakout is to the apex, the more failure prone is the reversal.
Let's look at a few examples.
Examples:
As with all patterns, these are also fractals and hence occur in all timeframes:
Chennai Petro: 30 minutes
Lastly, here is Nifty500 poised to reverse in a 10-minute timeframe:
(note that the force of breakout and the extent of follow-through is proportional to the timeframe and length of the base. This is true for all bases)
That’s all for today.
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