Triangle Chart Patterns Ascending, Descending, and Symmetrical

According to theory, entry points are based on a breakout above resistance or below support, with stop-loss orders placed just outside the triangle. Profit targets are often set based on the height (the distance between the highest and lowest points) of the pattern. If a symmetrical triangle follows a bullish trend, watch carefully for a breakout below the ascending support line, which would indicate a market reversal to a downtrend.

What Is the Triangle Pattern Strategy?

Larger gaps seem to leave less chance for the price to retreat back into the triangle. It should be emphasized that financial markets are irrational, and such unusual situations may arise from time to time. Therefore, when opening positions in the market, it is important to maintain a risk-to-reward ratio and set a stop loss. The Descending Triangle pattern is measured by the height of the triangle itself. To determine the profit target, it is necessary to draw a line from the maximum point to the horizontal line.

A descending triangle pattern can also be bullish and have a breakout in the opposite direction; this is referred to as a descending reversal chart pattern. The pattern is also known as a right-angle triangle because of its shape. The triangle pattern strategy involves waiting for a breakout and using the formation’s height to set profit targets. It’s combined with tools like volume, moving averages, and momentum indicators to confirm the move and avoid false breakouts​.

Groupon stock price originally trends lower in a downward direction before the price stalls and bounces within a narrow range, evening forming the descendign triangle. Groupon price moves lower below the support trendline before a sharp price drop to the exit price of the trade. The descending triangle reversal pattern at the bottom end of a downtrend is the direct opposite of a distribution event. In this case, you will find that price action stalls at the end of a downtrend. It is important to note that in this trading strategy we use the descending triangle pattern to anticipate potential breakouts. Along those lines, the moving average indicators serve the purpose of triggering the signal to initiate a trade.

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While the price holds at the support level, the series of lower highs shows that selling pressure is increasing. This often leads to a breakdown below the support line, where the price might experience a sharp decline. Traders see the formation as a bearish signal, indicating that the market could continue its downward trend. The descending chart pattern will clearly show the demand in stock.

What are Triangle Patterns?

Once that breakdown occurs, traders can short the stock, making it fall even lower. Oscillators like the Relative Strength Index (RSI) are useful to gauge momentum and potential reversal points. When the RSI breaks below 50, it suggests bearish market sentiment. The double bottom looks bullish but with heavy overhead resistance, the stock can’t rise far and the trade fails.

1. It is important to note that when trying to anticipate a potential breakout, we want to also look at other technical indicators.
2. Also, there is always the possibility that prices move sideways or higher for lengthy periods of time, acting contrary to the usual features of descending triangles.
3. The price continues bearish momentum following the breakout of the horizontal support line.
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5. Since price is consolidating with a bearish bias, traders need to watch out for impending breakout down through the support level.

It is a type of technical analysis that identifies a downward trend and breaks through the resist level causing price action to plummet. Traders select descending triangles because the pattern indicates a breakdown. When comparing ascending and descending triangles, there are several similarities and differences to consider. Both patterns are considered continuation patterns and are formed by a series of higher lows or lower highs, respectively.

Key facts

The same concept of measuring the distance from the support to the first high is used to determine targets. This is then projected to the upside for the minimum price objective. Technical analysts read the triangle descending triangle stock as an indicator of a continuation of an existing trend or reversal.

1. This strategy uses a very simple combination of trading volumes and asserting the trend, which can be used to capture short term profits.
2. The pattern should be clearly defined, with a trendline connecting the lower highs and a horizontal support line.
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4. Technical analysis is used to identify breakout patterns and strategies in different market phases.
5. Others see the pattern as an opportunity to buy at a discount, believing that the support level will hold and that the price will eventually move higher.

The resulting shape is a right triangle whose hypotenuse moves downward over time. Jesse has worked in the finance industry for over 15 years, including a tenure as a trader and product manager responsible for a flagship suite of multi-billion-dollar funds. He has worked for financial advisors, institutional investors, and a publicly-traded fintech company. Here are 3 ways you can get fresh, actionable alerts every single day. Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings. Our content is packed with the essential knowledge that’s needed to help you to become a successful trader.

Because a descending triangle pattern is considered bearish, when the price of a stock breaks the support line from above, this technical tool suggests the price will continue to fall. Descending triangles assume that momentum will drive a stock price lower when it breaks this milestone level. A regular descending triangle pattern is a continuation pattern that is generally considered as a bearish chart pattern with an established downtrend.

If a trader used standard rules and opened a sell position after the breakout candlestick closed, the pattern rules couldn’t be applied anymore as the target would be reached. Therefore, a trader could consider a surge in volumes and a sell signal of the MACD indicator to open a position earlier during the breakout candle formation (1). Descending triangle pattern psychology involves buy traders experiencing negative sentiment and pessimism as the market price is falling in a bearish direction. A small v-shape price bounce eventually occurs where buyers are optimistic of price appreciation.