The Descending Triangle
The Descending Triangle usually signals a continuation pattern in an downtrend, but sometimes can be found at the top of an uptrend, signaling a reverse.
This stock pattern has a flat lower trendline while the upper trendline slopes downwards.
Chart by MetaStock
The completion of the formation occurs when the price breaks through the lower, flat trendline before finishing the apex of the triangle.
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The following are key points in confirming the descending-triangle pattern:
On the descending triangle, the horizontal line represents demand that prevents the security from moving past a certain level.
It is as if a large buy order has been placed at this level and it is taking a number of weeks or months to execute, thus preventing the price from falling further. Even though the price cannot sink past this level, the reaction highs continue to shrink.
It is these lower highs that indicate increased selling pressure and give the descending triangle its bearish bias.
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