A descending triangle is a bearish chart pattern used in technical analysis to predict potential price declines. It is formed by drawing one trendline that connects a series of lower highs and another horizontal line that connects a series of lows. Here's how it works:
Structure of a Descending Triangle:
Trendlines:
Upper Trendline: This is a downward sloping line that connects the lower highs.
Lower Trendline: This is a horizontal line that connects the lows.
Price Movement:
The price moves between these two trendlines, creating a triangle shape.
The price typically bounces between the lower highs and the horizontal support level.
Characteristics:
Lower Highs: Each subsequent high is lower than the previous one, indicating weakening buying pressure.
Horizontal Support: The lows form a horizontal line, showing a consistent level where buyers step in to support the price.
How It Works:
Formation:
The descending triangle often forms during a downtrend, but it can also appear during an uptrend as a consolidation phase before the trend reverses.
It represents a battle between buyers and