//Technical analysis: Ascending & descending triangles

Technical analysis: Ascending & descending triangles

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  • Estimating a breakout point also helps in knowing where to place one’s stop loss.
  • Let’s look at the descending triangle chart patterns- one of the popularly employed statistical trends while analyzing a stock.
  • The upside breakout leads to an uptrend and a downside breakout anticipates a further down move.
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Check your securities / MF / bonds in the consolidated account statement issued by NSDL/CDSL every month. Stock brokers can accept securities as margins from clients only by way of pledge in the depository system w.e.f September 01, 2020. TP3 The profit target goes the same distance away as the back of the triangle, down from the entry.

Descending Triangle Pattern Identification

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Since many traders are likely to react to a declining triangle pattern, this might serve to drive the prices down even further. It is also quite easy to estimate a profit target from an ascending triangle pattern. This is usually done by subtracting or adding the height of this triangle – depending on its direction – from the breakout price. This value will be added to the upside breakout point to get a proper estimate of the profit target. On the other hand, this same value is subtracted from the price if it breaks on the downside. On the other hand, if the share’s price breaks out on a lower volume, this signals a warning sign that the breakout will lack in strength.

descending triangle

The unspoken rule among traders is that one should buy if the share’s breakout occurs on its upside, and sell/short their trades if the breakout occurs on the security’s downside. To aid in reducing one’s potential losses, a stop loss is placed right outside the ascending triangle chart pattern. For instance, suppose a trader takes a long trade on an upside breakout, she will place the stop loss just below the triangle’s lower trendline. The descending triangle pattern is the central aspect of price action trading. The chart pattern most likely forms towards the end of a downtrend.

An ascending triangle generally happens in an uptrend and is a bullish pattern usually traded on the upside while a descending triangle generally happens in a downtrend and is a bearish pattern usually traded on the downside. Both patterns can however be used as reversal patterns, however the use of that is rare. An ascending triangle pattern in an uptrend is easy to spot and reliable as an entry or exit signal.

Descending triangles also offer investors the opportunity to exit a stock in good time. First, let us look at the weekly charts of Venky’s, where I have marked a descending triangle with blue lines. I have taken the period prior to March 2020 crash to be able to understand the pattern better. At this time, traders prefer to sell excess stock, supply increases, and the price goes down once again. When the price touches upon the previous support area, an increased demand causes the price to rise back again.

How to Invest with Descending Triangle Chart Pattern?

A visible trend must exist for the triangle to be regarded as a continuation pattern. The ascending triangle pattern is usually created with two trendlines. The top trend line shows the overhead resistance level, while the bottom line shows the market’s upward momentum.

Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms. When the price breaks above the first trendline at the top of the triangle, it signals the resumption of an uptrend. This configuration of higher lows gives the triangle its bullish characteristics.

The price reaches the support level multiple times showing buying interest at this level. But whenever the price has bounced back up after testing the support it makes lower highs. These lower highs indicate that the sellers are fighting back to go beyond this support level.

Wanna invest in the right stock at the right price & at the right time. The company has a market capitalization of INR 5,921 crores and is a well-known housing finance company, trading at a P/E ratio of only 5.03, while the sector’s average is around 21.9. The company is also trading below its book value, with a P/B ratio of 0.36. When they see the pattern, they look for bullish dominance in the market space. This particular characteristic of the market is clear just before a breakout and can be used as a signal to set up a long position just before the breakout. Find the distance between resistance and support line and place it according to the breakout level.

Although a little bit higher than the senior support level, the price finds resistance, and the price starts to move back down. TradersKart offers One-Stop E-commerce Solution for all the traders, where traders will get access to their trading needs. Bulls re-enter and resume buying taking the place to its earlier highs, wherefrom it once again declines and forms a higher bottom, i.e., the stock keeps on forming higher lows.

Head & shoulder has Inverted head and shoulders, Double top has Double bottom similarly, Ascending Triangle has Descending triangle. We have already discussed the Ascending triangle in our previous blog. Now, let’s begin with understanding the Descending triangle pattern. The facilities on the Website are not intended to provide any legal, tax or financial or securities related advice. You agree and understand that the Website is not and shall never be construed as a financial planner, financial intermediary, investment advisor, broker or tax advisor.

Descending Triangle pattern

I am sure you can recall what the continuation pattern means from the previous blog. It just means that the price will ideally continue moving in the same trend as before the consolidation. Since Descending triangle is a bearish formation, it is formed in an ongoing downtrend and the price continues to move downward after consolidating in this pattern. If this pattern is formed at the end of an uptrend, it may signal a bearish reversal. Ascending triangle are generally considered Bullish and are most reliable when found during an up trend.

descending triangle

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Flexibility is an important aspect of trading with Fibonacci Speed/Resistance Fan Drawing Object patterns. After this price action is clear, you may go ahead and draw the descending triangle pattern. A prudent trader also determines the volume after the descending triangle pattern forms and is confirmed.

Symmetrical Triangle Pattern: Definition & Interpretation

The most common price targets are generally set to equal the entry price minus the vertical height between the two trend lines. A descending triangle occurs when there are lower highs, but the lows recur at the same price level due to support. Descending triangles indicate an downward slope, with a flat base and a series of lower highs. An ascending triangle occurs when there are higher lows, but the highs recur at the same price level due to resistance. Ascending triangles indicate an upward slope, with a flat top and a series of higher lows.

I mentor Indian retail investors to invest in the right stock at the right price and for the right time. However, the peaks are always lower than the past peaks forming a https://1investing.in/. Let us look at the daily charts of Bajaj Consumers, where I have marked a descending triangle with blue lines.

If you come across any individual or organisation claiming to be part of Enrich Money and providing such services, kindly intimate us immediately. SL2 The stop loss is placed above the resistance level at which the price is reversed. Descending triangle are generally considered Bearish pattern which indicates distribution and are most reliable when found during a down trend. The bottom part of the triangle appears flat, while the top part has a downward slope/inclined. Prices typically drop to a point where the security becomes oversold.

Let us look at a few examples of the descending triangle chart pattern to understand the pattern better. Moreover, we will also understand why it is common to interpret it wrongly. Subsequently, it meets a high demand area once again, only to rise back. The lower highs are a result of the bearish dominance and the sequence that results is the hypotenuse of the upside of the descending triangle pattern. Profit and Stocks is an exceptional team of market traders with over 12+ years of combined trading experience.