Just yesterday morning, I wrote about noticing an uptick in opportunities across the board, volume, and high-quality setups.

Surprise, surprise, more great opportunities for trades and learning showed up throughout the day yesterday.

Another one of my favorite setups, similar to the consolidation breakout pattern, developed yesterday in a certain penny stock.

So before I get into the setup I saw in ZNOG, let’s quickly go over the Triangle Pattern.

What is the Triangle Pattern?

A chart has this pattern when two trendlines, drawn on a chart with a range, are converging.

From a technical analysis perspective, Triangle patterns are continuation or momentum patterns. The reason is that a trader might expect there to be momentum once the pattern is confirmed and the price breaks above the resistance of the triangle.

There are three types of Triangles: Ascending, Descending, Symmetrical.

Image from Investopedia

Ascending Triangle: This is a bullish pattern as the triangle’s lower band or support line is rising, indicating that buyers are stepping up and the price is getting closer to the breakout level.

Descending Triangle: This is a bearish pattern and the opposite of the Ascending Triangle. In this pattern, the resistance level declines towards support and a breakdown.

Symmetrical Triangle: The symmetrical pattern is when both the lower and upper bands of the triangle converge towards one another, ultimately resulting in either a breakout or breakdown.

It is imperative to watch for rising volume on any triangle pattern breakout. Often, I have noticed that an increase in volume on a breakout might indicate a confirmed breakout and possible momentum.

Alright, Gang, now that you have a solid understanding of the pattern, let’s take a look at ZNOG from yesterday.

Zion Oil & Gas, Inc. (ZNOG)

ZNOG, per Yahoo, operates as an oil and gas exploration company in Israel. It holds a petroleum exploration license onshore Israel, the New Megiddo License 428, comprising an area of approximately 99,000 acres. ZNOG was incorporated in 2000 and is headquartered in Dallas, Texas.

I spoke about the stock yesterday before it broke out in the chatroom. I had the stock on my radar because It formed a solid ascending triangle.

Not only is the pattern an ascending triangle, which is bullish, but the stock also saw a sharp rise in volume yesterday, relative to the previous day.

The stock closed at the high of the day yesterday, $0.3189, and up 41.73%. What I particularly like about the close yesterday is that the stock was able to close above the triangle’s resistance. 

Based on the volume, the strong close, and overall breakout pattern, I would think the stock might reach the 200d MA of around $0.384. That seems like a solid target for this play.

Typically, with a breakout, I like to see momentum the following day of the breakout and the stock to hold above the previous day’s high.

Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

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