List of Financial Market Terms

Descending Triangles are bearish chart patterns created by drawing a downtrend line (A) that connects a group of lower highs and a second line (B) that has proven to be a strong level of support. Traders in day trading, stock trading, options trading, and futures trading watch for a move below support, which indicates a downside move in the amount of the measuring implications.

What are the measuring implications you ask?  The difference from A and B establishes the height of the triangle. Once support is broken, the AB height can be subtracted from support level to determine the target on the move.

Let's take a look at a real life example in Home Depot (NYSE: HD):

descending triangle in HD

The height (yellow oval) is established by subtracting the support line (35.00) from the start of the downtrend (37.00).  This results in a height of 2.00 (37-35).  Subtract 2 from the support line of 35 to establish the target.  In this case the target is 33.00 (35-2).

 

Related terms: Ascending Triangle, Symmetrical Triangle, Bull Trap, Bear Trap

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