The Descending Triangle:
A Bearish Chart Pattern
Descending triangle is a bearish chart pattern. It can act as a continuation as well as a reversal. A downward sloping trend line formed due to sellers being impatient at every rally high and selling at a much lower levels compared previous highs gives the chart pattern its bearish bias. Buyers try to defend the price at the same price level which shows itself as the the horizontal boundary of the descending triangle. Successful breakouts usually breach the lower boundary of the chart pattern resulting in a decline. However, it is not uncommon to see a breach of the upper boundary resulting in a failed descending triangle chart pattern completion. One should be open to both possibilities.
Current price action and the chart pattern development suggests a possible bearish descending triangle forming with the horizontal boundary acting as strong support at 5,880 levels. The downward sloping upper boundary is acting as resistance at 7,220 levels. Volatility is at an extreme low level. A decisive breakout from the 7 month-long descending triangle is likely to result in a strong directional movement. Breakdown of the 7 month-long descending triangle can send the prices as low as 3,000 levels. Breakout above 7,220 levels will put the bearish interpretation in question and suggest higher levels.
Below is an educational video explaining in detail how a descending triangle develops, how you can calculate possible chart pattern price targets and the possible price action following the breakout.
Descending Triangle Breakdown Tutorial:
Aksel is a Chartered Market Technician (CMT) with more than 15 years of experience as a classical chart trader and global equity market analyst. I’ve worked for various companies throughout the GCC and MENA regions during much of that time.
Please check out more of Aksel's work at his site: Tech Charts Website
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