INVESTING | FINANCIAL LITERACY
Descending Triangle Chart Explained
Greg Thompson CMT ® Portfolio Manager
Historical trading activity and price changes of a security can be invaluable indicators of a security’s future price movements. Charts are regularly used when observing the market to predict future performance. Previously, we discussed the “inverse head and shoulders” chart pattern concerning the bearish-to- bullish trend reversal and a signal that a downward trend is nearing its end.
A descending triangle is a bearish continuation chart pattern created by drawing one trend line to connect a series of lower highs and a second horizontal trend line that connects a series of lows. This chart pattern tends to be popular among traders as it clearly shows that the demand for an asset is weakening. When the price breaks below the lower support, the indication is clear that the downside momentum is likely to continue with the potential to become even stronger.
Let us explore another common chart pattern type: the descending triangle.
12 PERSPECTIVE Summer 2023
PERSPECTIVE Summer 2023 13
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