How to Draw Descending Triangle Perfectly

The descending triangle is just a mirror image of the ascending, and is generally considered a bearish pattern. Notice in Figures 6.4a and b the descending upper line and the flat lower line. This pattern indicates that sellers are more aggressive than buyers, and is usually resolved on the downside. The downside signal is registered by a decisive close under the lower trendline, usually on increased volume. A return move sometimes occurs which should encounter resistance at the lower trendline.

The measuring technique is exactly the same as the ascending triangle in the sense that the analyst must measure the height of the pattern at the base to the left and then project that distance down from the breakdown point.

The Descending Triangle as a Top

While the descending triangle is a continuation pattern and usually is found within downtrends, it is not unusual on occasion for the descending triangle to be found at market tops. This type of pattern is not that difficult to recognize when it does appear in the top setting. In that case, a close below the flat lower line would signal a major trend reversal to the downside.
Labels: Price Action Patterns