Here is my take on how to trade BAC's ascending triangle. If I were to take a position at the current price of about 15.68 and set a stop between 14.92 (on the tight sight) and 14.72 (on the looser end) I would be risking anywhere from .70 to .90. Say I take a stop at .80, well my target is actually below the previous high ranging from 17.5- 18.0, making my profit anywhere from 1.82- 2.32. If I were to lock in a $2 profit, I would have a risk reward ratio 1:2.5. Not to shabby. Where did I come up with these targets? Well if you take a look at the chart you can see the rising trendline where higher highs are being created. If price were to break below 15.00 that trendline would be broken. However you have to be weary of fake outs. Instead of setting a tight stop at 14.99, I decided to take 14.72 and draw a line in the sand so to speak. By this point Three additional critical points of support would have been broken, and the case for the ascending triangle deteriorates. As for the profit target, it is VERY conservative. First of all if we saw follow through with the ascending triangle pattern you can expect 20-35% rise from the BREAKOUT point. However, because of fake outs and potential reversals, a conservative approach would be to lock in some profits at the first target price, and letting the rest ride to see if we get follow through with the ascending triangle pattern.
What chart should I analyze next? Comment below!
What chart should I analyze next? Comment below!