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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.
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.
For more information on non-Elliott patterns, visit descending triangles.
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.
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