Descending Triangle
A descending triangle is a chart pattern used in technical analysis that is created by drawing one trend line that connects a series of lower highs and a second trend line that connects a series of higher lows. The descending triangle is considered a bearish pattern that indicates a potential downward move in the price of the security.
The descending triangle is created when the price of a security moves lower and then consolidates in a tight range. The lower highs and higher lows create a triangle shape on the chart. The pattern is considered complete when the price breaks below the lower trend line. This is considered a bearish signal and indicates that the price of the security is likely to move lower.
The descending triangle is a popular pattern among technical analysts because it can be used to identify potential entry and exit points in the market. Traders often look for the pattern to form and then wait for the price to break below the lower trend line before entering a short position. The pattern can also be used to identify potential exit points. Traders often look for the price to break above the upper trend line before exiting a short position.
History of Descending Triangle
The descending triangle pattern was first described by Charles Dow in the late 19th century. Dow was a pioneer in the field of technical analysis and is credited with developing the Dow Theory, which is the foundation of modern technical analysis. The descending triangle pattern is one of the most popular chart patterns used by technical analysts today.
The descending triangle pattern is often used in conjunction with other technical indicators to confirm the potential move in the price of the security. For example, traders may look for the pattern to form and then wait for the price to break below the lower trend line before entering a short position. They may also look for other technical indicators such as moving averages or momentum indicators to confirm the potential move.
Comparison Table
| Pattern | Direction | Confirmation |
|---|---|---|
| Descending Triangle | Bearish | Break below lower trend line |
| Ascending Triangle | Bullish | Break above upper trend line |
Summary
The descending triangle is a chart pattern used in technical analysis that is created by drawing one trend line that connects a series of lower highs and a second trend line that connects a series of higher lows. The descending triangle is considered a bearish pattern that indicates a potential downward move in the price of the security. Traders often look for the pattern to form and then wait for the price to break below the lower trend line before entering a short position. For more information about this term, you can visit Investopedia, Investing.com, and other financial websites.
See Also
- Ascending Triangle
- Head and Shoulders
- Double Top
- Double Bottom
- Rising Wedge
- Falling Wedge
- Cup and Handle
- Flag and Pennant
- Symmetrical Triangle
- Technical Analysis
