In descending triangles, trend lines converge with a horizontal trend line for lower support, and a negative sloping resistance trend line.
Descending Triangles offer a clearer picture of potential breakouts. Since the lower support level is horizontal below, and upper support is descending downward, the pattern suggests that the market trend is still bearish and the breakout will likely be bearish
Because these patterns are converging, constricting price action to tighter and tighter trading ranges, they suggest that price action will eventually breakout. Swing traders will watch for breakouts as price action approaches the triangle's trend lines.
Fundamentally, triangles often form as uncertainty fills the market, and traders are unsure of where to take price. It is common for the market to form triangles leading up to major economic reports or news, as traders consolidate their positions and hold off entering the market until the impact of the expected release has been felt. The actual event may cause the market to move sharply, thus triangles often precede big breakouts in price action.
There are three types of triangle patterns, (Symmetrical, Ascending & Descending) each suggest something different about price the future direction of price action.
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