“Descending Triangles” are similar to “Ascending Triangles” formation rules except they are bearish. “Descending triangles” form in bear markets and favor breakdowns. A “descending” triangle is bound by two trend lines connecting a downward slope trend line and a flat trend line connecting the lows of the pattern. Trades usually occur near the apex as the price closes outside the bottom trend line suggesting a breakdown. The price must intersect trend lines at least twice before the pattern emerges. Like the Ascending triangles, “Descending Triangles” also have a high success rate.
Trade one tick below the low of the breakdown bar (outside of the triangle). Confirm the breakdown with increased volume.
“Descending” triangles have similar targets like “Ascending” triangles. Measure “Triangle” depth at the lowest and highest points and set targets at 50% and 100% range from the breakdown point.
Place a “stop” order outside the downward slope trend line. If price closes above the top trend line, exit the trade.
Trading Descending Triangles
Trading Descending Triangle
The above example illustrates a “Descending triangle” from the daily Gold futures chart. In July 2006, Gold reached 700 and retraced to 620 by the mid of July. Gold made a series of lower highs and a flat bottom near the 620 level to form a “Descending Triangle”. During the first week of September, Gold closed below 620 to trigger a sell-off. The depth of the “Triangle” was 80 (700 to 620) points.
- A “short” trade was entered at 6 18 with target of 570.
- A “stop” order was placed above the trend line at the 640 level.
- A 50% depth target area can be seen from the trade entry.