Chart pattern: Descending triangle
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What is a descending triangle?
A descending triangle is a bearish continuation chart pattern. The pattern is formed by two converging lines.
The first line is a bearish oblique resistance line, also known as the "descending triangle resistance line".
The second line is a horizontal support, also known as the "descending triangle support line".
The descending triangle is confirmed/valid if it has good oscillation between the two lines.
Each of these lines must have been touched at least twice to validate the pattern.
NB: a line is said to be "valid" if the price line touches the support or resistance at least 3 times.
This implies that the descending triangle pattern is considered valid if the price touches the support line at least 3 times and the resistance line twice (or the support line at least twice and the resistance line 3 times).
A descending triangle’s price objective is determined by the high point of the triangle’s base, which is plotted on the break out point (below the support). Another technique consists of drawing a line parallel to the descending triangle support line, from the first contact with the resistance.
Graphical representation of a descending triangle
Descending triangle statistics
- In 54% of cases, the exit is bearish.
- In 61% of cases, a descending triangle is a continuation pattern.
- In 54% of cases, the triangle's price objective is reached when the support is broken downwards (exit from the descending triangle).
- In 64% of cases, the price makes a pullback in resistance on the triangle support line after exit.
- More than half the time, when a downwards false break occurs, the final exit is upwards. On the other hand, false upwards breaks are rare at only 6%.
Notes on the descending triangle
- The exit most often occurs at 2/3 of the triangle’s length. This exit level offers the best performance.
- The descending triangle’s price objective is generally obtained before the tip of the triangle (intersection of the two lines forming the triangle).
- False breaks give no indication of the true direction of exit.
- Avoid taking a position if the break/exit occurs before 2/3 of the triangle’s length.
- Resistance pullbacks on the descending triangle support line are detrimental to performance.
For your information: A descending triangle is a continuation chart pattern. Its opposite is an ascending triangle.
