Thomas N. Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with almost 30 years of stock market experience and widely regarded as a leading expert on chart patterns. His four books, including the best selling Encyclopedia of Chart Patterns, have been translated into six languages. He may be reached at

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Bulkowski’s Descending Triangle

Market

Industrials (^DJI):

Transports (^DJT):

Utilities (^DJU):

Nasdaq (^IXIC):

S&P 500 (^GSPC):

As of 09/02/2010

10,320.10 50.63 0.5%

4,342.03 58.62 1.4%

396.87 -0.49 -0.1%

2,200.01 23.17 1.1%

1,090.10 9.81 0.9%

YTD

-1.0%

5.9%

-0.3%

-3.0%

-2.2%

Tom’s Targets

10,475 by 09/15/2010

4,450 by 09/15/2010

400 by 09/15/2010

2,250 by 09/15/2010

1,100 by 09/15/2010

Mkt Overview: 08/29/2010

Test Portfolios and CPI

Indus. strength: -6.9%

Mutt Losers: 10.2%

Mutt Winners: 1.1%

Wilder RSI: 1.2%

CPI: on 08/27/2010

This page describes the descending triangle pattern of the Elliott wave principle, how price moves not in a straight line but in a series of rises and retracements.

The descending triangle in a bull market. The figure to the right shows what a descending triangle looks like in a bull market. The descending triangle is a region of horizontal price movement, a consolidation of a prior move, and it is composed of "threes." That means each of the A-B-C-D-E waves have three subwaves. I labeled the B subwaves with red numbers, 1, 2, and 3 as an example. Expect volume and volatility to recede as the pattern moves toward the breakout, but this is not a requirement.

In a descending triangle, the bottom of the triangle finds support at a horizontal trendline (the horizontal red line), and the top of the triangle slopes downward following another red trendline.

The descending triangle in a bear market. A descending triangle in a bear market is not an inverted picture of a bull market triangle. Rather, the chart to the right shows a descending triangle with the waves inverted while still obeying the flat bottom and down sloping top trendlines. The A-B-C-D-E waves subdivide into threes, forming a 3-3-3-3-3 configuration.

On rare occasions, a descending triangle can nest inside a descending triangle. You see this when the wave count exceeds the A-B-C-D-E format, forming a nine wave pattern. Also, Frost and Prechter say that when price reaches the apex of the triangle, expect the market to turn.

Rules

The descending triangle has rules that govern its shape. They are listed here.

The waves bottom near the same price, following a horizontal trendline.
The tops of the waves generally follow a down-sloping trendline.
Five waves compose the descending triangle (A-B-C-D-E), unless extended.
Each of the A-B-C-D-E waves are composed of three subwaves, so it has a 3-3-3-3-3 configuration.
Volume and volatility tend to recede over the life of the pattern, but this is not a requirement.

Bulkowski’s Descending Triangle

Rules

See Also