Descending Triangles

The descending triangle is a powerful ‘sell’ signal continuation chart patternTutorial Magnifying Glass that can be found in any market or time frame.

The price bars/candles form a clear support level in an existing downtrend, but yet also lower and lower swing highs creating the triangle or wedge formation. The pattern indicates that whilst the number of sellers is more or less constant, there are fewer and fewer buyers as the triangle develops and narrows.

Eventually the lack of buyers and therefore surplus of asset availability drives price down, often very sharply and quickly, rather like squeezing a tube of toothpaste!

Look to enter the trade short on the break of the support level or possibly after a successful retest of this level once broken.

The projected price target is often taken as the trade entry price plus the distance in price between the widest point of the triangle down to the support . However, as always price action and the presence of other key support and resistance levels below often serve as better guides as to when to take profits.

Check out the video below for further explanation.

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