The descending triangle pattern is a bearish continuation pattern created by drawing a horizontal line. This line is connected to the low point and the trend line that connects the lower high. The pattern will occur as reverse in an upward trend. The chart pattern goes by name of a falling triangle that allows traders to measure the distance from the start of the pattern. So it is represented by the highest point, all the way to the flat support line. It is a type of technical analysis that identifies a downward trend and breaks through the resist level causing price action to plummet. Traders select descending triangles because the pattern indicates a breakdown. At price drop, buyers will come to push the price higher. Descending a triangle will indicate the lack of buying pressure. Seller will begin to sell at the low price it goes lower high. So breakdown occurs when the volume is high and move faster.
The descending triangle pattern is best because they can earn profit over a short time for traders. Traders will take a bear position after a high volume break. So the price target is equal to entry points minus the vertical distance between drawn lines when a breakdown occurs. The stop loss position is at the upper trend line to acquire profit from descending triangle traders. They should identify a clear breakdown and avoid false indications. Also, consider no breakdown as the price may test upper resistance before moving down again to the lower support line. The descending triangle pattern is the reverse chart of the ascending triangle. There is a horizontal upper trend line with a rising lower. Reversals happen with descending chart but they are considered bullish in nature.
Example
The price smart Inc shares have a series of lower high. The series of a horizontal low is formed by a descending triangle chart pattern. The traders will check the definitive breakdown from lower trend line support. Then they occur at high volume before taking a short position in the stock. The breakdown will not occur at a price target. There is a difference between upper and lower trend lines so stop is placed at 80.00 in event of a false breakdown.
At anticipate breakout, we look at technical indicators also. The moving trend will help the signal to execute the trade. The help predict goes upward as breakout occurs when the price drops after busted triangle. So we check the breakout price is above/below 200 simple moving averages. When breakout goes below 200, then moving averages will trend and perform better on average. To help predict downward breakout is used. At a time when the price of breakout is above 200per day moving average is a busted triangle. It will observe the price increase of 13% below 200 of the simple moving average.
Why is the Descending Triangle Important?
It is a popular chart pattern and easy to understand. The descending chart pattern will clearly show the demand in stock. The price goes down below the support level and indicates the stock is continuing in a downward direction. A bearish pattern will enable traders to make average and return after a short period. So descending triangle points to a reversal pattern and represent a bearish continuation pattern.
Attributes
Pattern type : continuation
Indication : Bearish
Breakout Confirmation : It is close below the lows on above-average trading volume.
Measuring : It will subtract height from the highest high and low pattern. Then it subtracts from the breakout level.
Volume : Descending triangle formation and expanding the breakout will decline volume.
Conclusion
The pattern act as a indicator for future trend. Descending pattern is a favorite among traders because it is easy to recognize. It will have a comprehensive description and images to recognize the importance of chart patterns and become the best trader. This pattern is a versatile chart pattern that displays the distribution phase in stock.
