Rapid gains and good risk rewards often follow this trading strategy. This trading strategy rides the short term momentum upwards. This trading strategy also relies on the ascending triangle chart pattern.
You will need to look for an ascending triangle in the 15 min chart. Sometimes it is not easy to spot but once you learn to spot it, you can often find that this trading strategy will give you good returns.
In order to spot this setup, you will need to have:
In the chart above we can see how AAP formed a 15 min ascending triangle. Notice also that the stock had a 15 min bullish cross on the day the chart pattern forms. If there was not bullish cross, then do not touch the stock. You may be a day early of a day late to the party.
A good setup will rarely have the stock drop below the rising 15 min 20 MA. You should sell 1/3 or 1/2 when the stock reaches a risk : reward of 1 : 1. This means that if you risk $100 and are making $100, sell 1/3 or 1/2 of the stock. Then raise the stop loss to breakeven.
Consider holding the stock for no more than 2 days. However you can use the 15 min 50 MA as a trailing stop loss. That means, in the chart above, you can still hold AAP as long as it has not drop below the 15 min 50 MA.
You should use the daily chart to have a bullish confirmation. The chart above is the daily chart of AAP. On the day the 15 min ascending triangle formed, the stock also made a bullish bottoming tail. The stock was also about to break a daily downtrend line. This adds more confidence to the setup.
The chart above is the chart of AON. A bullish ascending triangle formed and a bullish cross also happened on that day. Look at how the stock shoot up.
APTV also formed a bullish ascending triangle. Sometimes it takes some effort to notice the pattern. The trick is to have an almost similar high at the upper line and a higher low which you can draw a trend line to connect.
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