Descending Triangle

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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

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  2. Triangle

    A technical analysis pattern created by drawing trendlines along ...
  3. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  4. Support (Support Level)

    The price level which, historically, a stock has had difficulty ...
  5. Momentum

    The rate of acceleration of a security's price or volume. The ...
  6. Trendline

    A line that is drawn over pivot highs or under pivot lows to ...
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