What is a decending triangle?

A descending triangle is a bearish pattern. It consist resistance heading down while support stays the same. Finally the stock breaks below support and heads lower. The break below support is a bearish sell signal.

This chart is an example of a descending triangle. The stock was making lower highs, but resistance stayed at around $8. It finally broke below $8 giving off a bearish sell signal.

target It is said that the target for a Descending triangle is the support level minus the widest part of the triangle. In this particular case that measurement would not work because the widest part of the triangle is about $15. If you were to trade this you should have a stop above the new resistance level of $8.

Always remember to develop your own system and don’t risk that much on any one trade.