Descending Triangle


DEFINITION of 'Descending Triangle'

A bearish chart pattern used in technical analysis that is created by drawing one trendline that connects a series of lower highs and a second trendline that has historically proven to be a strong level of support. Traders watch for a move below support, as it suggests that downward momentum is building. Once the breakdown occurs, traders enter into short positions and aggressively push the price of the asset lower. The chart below is an example of a descending triangle:

Descending Triangle

BREAKING DOWN 'Descending Triangle'

This is a very popular tool among traders because it clearly shows that the demand for an asset is weakening, and when the price breaks below the lower support, it is a clear indication that downside momentum is likely to continue or become stronger. Descending triangles give technical traders the opportunity to make substantial profits over a brief period of time. The most common price targets are generally set to equal the entry price minus the vertical height between the two trendlines.

A descending triangle is the bearish counterpart of an ascending triangle.

  1. Bear

    An investor who believes that a particular security or market ...
  2. Short (or Short Position)

    A short position is the sale of a borrowed security, commodity ...
  3. Momentum

    The rate of acceleration of a security's price or volume. The ...
  4. Triangle

    A technical analysis pattern created by drawing trendlines along ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. Support (Support Level)

    The price level which, historically, a stock has had difficulty ...
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  1. What is the breakout target price of an descending triangle?

    Descending triangles are commonly occurring bearish continuation patterns. They are defined by a relatively stable support ... Read Full Answer >>
  2. What trading opportunities does a descending triangle offer?

    Descending triangles are placed on price charts by drawing a horizontal support trendline with a descending resistance trendline ... Read Full Answer >>
  3. How do traders identify descending triangle patterns?

    Descending triangles are formed with two trendlines drawn on a security or index's price chart, one as a resistance line ... Read Full Answer >>
  4. Where do traders place orders when they identify descending triangles?

    Descending triangles offer traders the opportunity to quickly see a significant profit once the market breaks out of the ... Read Full Answer >>
  5. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  6. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>

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