A descending triangleA descending triangle is a technical analysis chart pattern used in trading and investing. It's a bearish continuation pattern that forms when:
1. A price consolidates within a triangle, with
2. A falling upper trendline (resistance) and
3. A flat lower trendline (support).
The descending triangle indicates a breakdown below the support level, suggesting a continued downward price move. It's considered a reliable pattern, as it shows selling pressure increasing while buying pressure decreases.
Key points:
- The pattern typically forms during a downtrend.
- The falling resistance line shows decreasing demand.
- The flat support line represents a level of supply.
- A breakdown below the support level confirms the pattern.
- The target price is estimated by measuring the height of the triangle and subtracting it from the breakdown point.
The descending triangle is a strong indication of a potential price drop, and traders often use it as a signal to sell or short a price. As with any chart pattern, it's essential to combine it with other technical and fundamental analysis tools for confirmation.
