Successful Trading Chart Patterns – Part 5 of 7

Downtrend Continuation Patterns

 

14. Symmetrical Triangle – Downtrend

 

Symmetrical triangles, a pattern with two lower highs and two higher lows, represent a steadily-increasing equilibrium among traders. Once this equilibrium reaches its tipping point, bulls, in the case above, have to abandon their stance on price as volume grows during the breakout. As the price abruptly breaks faraway from this equilibrium, violent moves are inclined to occur. Be mindful of false breakouts, specially the first one, if the amount reaches the tip of the triangle. Many traders are mindful of these patterns, and they tend to wait for the development, then jump in simultaneously.

 

15. Descending Triangle – Downtrend

 

Symmetrical triangles, a pattern with two lower highs and two higher lows, represent a steadily-increasing equilibrium among traders. Once this equilibrium reaches its tipping point, bulls, in the case above, have to abandon their stance on price as volume grows during the breakout. As the price all of a sudden breaks far from this equilibrium, violent moves tend to occur. Be alert to false breakouts, specially the first one, if the amount reaches the tip of the triangle. Many traders are aware of these patterns, and they tend to wait for the organization, then jump in simultaneously.

 

16. Rising Wedge – Downtrend

 

When rising wedges occur in a downtrend, they are virtually always continuation patterns. This small retracement/consolidation pattern against the trend is a futile attempt by the bulls to turnaround for the tides, but more bears sit on the sideline awaiting the breakout to the negative effects. Price increases with volume decreases indicate an illegitimate price move. Volume weakens during the consolidation to the wedge point, then increases during a breakout. Be mindful of immediate retests of the support levels after the escape.

 

 

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