EDU Articles

Learn about investing, trading, retirement, banking, personal finance and more.

Ad is loading...
Help CenterFree ProductsPremium Products
IntroductionMarket AbbreviationsStock Market StatisticsThinking about Your Financial FutureSearch for AdvisorsFinancial CalculatorsFinancial MediaFederal Agencies and Programs
Investment PortfoliosModern Portfolio TheoriesInvestment StrategyPractical Portfolio Management InfoDiversificationRatingsActivities AbroadTrading Markets
Investment Terminology and InstrumentsBasicsInvestment TerminologyTradingBondsMutual FundsExchange Traded Funds (ETF)StocksAnnuities
Technical Analysis and TradingAnalysis BasicsTechnical IndicatorsTrading ModelsPatternsTrading OptionsTrading ForexTrading CommoditiesSpeculative Investments
Cryptocurrencies and BlockchainBlockchainBitcoinEthereumLitecoinRippleTaxes and Regulation
RetirementSocial Security BenefitsLong-Term Care InsuranceGeneral Retirement InfoHealth InsuranceMedicare and MedicaidLife InsuranceWills and Trusts
Retirement Accounts401(k) and 403(b) PlansIndividual Retirement Accounts (IRA)SEP and SIMPLE IRAsKeogh PlansMoney Purchase/Profit Sharing PlansSelf-Employed 401(k)s and 457sPension Plan RulesCash-Balance PlansThrift Savings Plans and 529 Plans and ESA
Personal FinancePersonal BankingPersonal DebtHome RelatedTax FormsSmall BusinessIncomeInvestmentsIRS Rules and PublicationsPersonal LifeMortgage
Corporate BasicsBasicsCorporate StructureCorporate FundamentalsCorporate DebtRisksEconomicsCorporate AccountingDividendsEarnings

What is the Descending Triangle (Bullish) Pattern?

The Descending Triangle pattern is formed when the price of a security establishes a support level (1, 3, 5) and bounces off that level to a declining resistance level, creating a down-­sloping top line (2, 4). The breakout can either be up or down, depending if the resistance or highest support level is broken first.

This pattern is commonly associated with directionless markets since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control.

Trade idea

Once the price breaks out from the top pattern boundary, day traders and swing traders should trade with an UP trend. Consider buying a security or a call option at the breakout price level. To identify an exit, compute the target price by adding the pattern height from breakout point. For upward breakouts the level is the highest high within the triangle (2). Pattern height is the difference between the level of the bottom horizontal line and the highest high.

To limit potential loss when price suddenly goes in the wrong direction, consider placing a stop order to sell at or below the breakout price.

Ad is loading...