Descending Triangles

General Information:

Descending triangles are bearish biased patterns that are characterized by a series of at least two lower highs along with a series of at least two lows that stop or find support out at around the same price. The lower highs can be connected with a downtrend line, while the lows can be connected with horizontal or near horizontal line that forms the support area. Keep in mind that descending triangles MUST have at least two minor highs forming the top trendline and at least two minor lows forming the bottom. Many people incorrectly identify descending triangles, for instance consider a pattern that has 3 lower highs but only has 1 low – this is not a descending triangle even though it might look exactly like one.

The volume tends to decrease during the formation of the pattern. A generic price target can be calculated by measuring the height of the triangle and subtracting it from the horizontal support line that forms the bottom of the pattern.

Below are two tables of statistical information from the book “Encyclopedia of Chart Patterns” by Thomas N Bulkowski

Statistics: based on a population of 689 examples in 500 stocks from 1991 – 1996.