Descending Triangle
A descending triangle is a chart pattern used in technical analysis created by drawing one trend line connecting a series of lower highs and a second horizontal trend line connecting a series of lows.A regular descending triangle pattern is commonly considered a bearish chart pattern or a continuation pattern with an established downtrend. However, a descending triangle pattern can also be bullish, with a breakout in the opposite direction, and is known as a reversal pattern.
What is a Descending Triangle
A descending triangle is a chart pattern used in technical analysis, created by drawing a descending trendline connecting a series of lower highs and a horizontal trendline connecting a series of lows. The conventional descending triangle pattern is typically considered a bearish chart pattern or a continuation pattern in an established downtrend. However, a descending triangle pattern can also be bullish, with a breakout in the opposite direction, and is then referred to as a reversal pattern.
Origin
The concept of the descending triangle pattern originated in the early stages of technical analysis development, particularly in the early 20th century. Technical analysts observed this specific price formation by studying historical market data and classified it as an important chart pattern. Over time, the descending triangle pattern has been widely applied in the technical analysis of stocks, forex, and other financial markets.
Categories and Characteristics
Descending triangles are mainly divided into two categories: bearish descending triangles and bullish descending triangles. Bearish descending triangles typically appear in a downtrend, indicating that prices may continue to fall. Their characteristic is that prices form a horizontal support line near the lows, while the highs gradually decrease, forming a descending trendline. Bullish descending triangles appear in an uptrend, indicating that prices may reverse upwards. Their characteristic is that prices form a horizontal support line near the lows, while the highs gradually decrease, forming a descending trendline, but eventually, prices break out upwards from the horizontal support line.
Specific Cases
Case 1: On the daily chart of a certain stock, the price formed a descending triangle pattern over a period of time. The price formed a horizontal support line near the lows, while the highs gradually decreased, forming a descending trendline. Eventually, the price broke through the horizontal support line and continued to fall, confirming the bearish descending triangle pattern.
Case 2: In the forex market, the price of a certain currency pair formed a descending triangle pattern over a period of time. The price formed a horizontal support line near the lows, while the highs gradually decreased, forming a descending trendline. Eventually, the price broke through the horizontal support line upwards, confirming the bullish descending triangle pattern.
Common Questions
1. How to identify a descending triangle pattern?
A descending triangle pattern is identified by connecting a series of lows with a horizontal support line and a series of lower highs with a descending trendline.
2. Is the descending triangle pattern always bearish?
While the conventional descending triangle pattern is typically considered bearish, it can also be bullish, depending on the direction of the price breakout.
