As of 03/18/2024
  Indus: 38,790 +75.66 +0.2%  
  Trans: 15,418 -81.05 -0.5%  
  Utils: 853 +3.06 +0.4%  
  Nasdaq: 16,103 +130.28 +0.8%  
  S&P 500: 5,149 +32.33 +0.6%  
YTD
 +2.9%  
-3.0%  
-3.2%  
 +7.3%  
 +8.0%  
  Targets    Overview: 03/13/2024  
  Down arrow38,000 or 39,350 by 04/01/2024
  Up arrow16,300 or 15,350 by 04/01/2024
  Up arrow885 or 830 by 04/01/2024
  Down arrow15,200 or 16,600 by 04/01/2024
  Up arrow5,250 or 5,000 by 04/01/2024
As of 03/18/2024
  Indus: 38,790 +75.66 +0.2%  
  Trans: 15,418 -81.05 -0.5%  
  Utils: 853 +3.06 +0.4%  
  Nasdaq: 16,103 +130.28 +0.8%  
  S&P 500: 5,149 +32.33 +0.6%  
YTD
 +2.9%  
-3.0%  
-3.2%  
 +7.3%  
 +8.0%  
  Targets    Overview: 03/13/2024  
  Down arrow38,000 or 39,350 by 04/01/2024
  Up arrow16,300 or 15,350 by 04/01/2024
  Up arrow885 or 830 by 04/01/2024
  Down arrow15,200 or 16,600 by 04/01/2024
  Up arrow5,250 or 5,000 by 04/01/2024

Bulkowski on Descending Triangles

Statistics updated on 8/27/2020.

For more information on this pattern, read Encyclopedia of Chart PatternsEncyclopedia of Chart Patterns., pictured on the right. It has a chapter dedicated to descending triangles.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

At one time, I didn't have a favorite chart pattern because I considered them just buy or sell signals. However, I was starting to show affection for descending triangles with upward breakouts. I've made a lot of money trading this pattern, certainly more than from trading their ascending triangle brothers. However, updated performance numbers say performance has dropped substantially over the decades (almost in half since the 1990s).

Click descending triangle to read about the Elliott wave version.

Important Results
Identification Guidelines
Trading Tips
Example
See Also

 

Descending triangle chart pattern

Descending Triangle

Descending Triangle: Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 33 out of 39/15 out of 36
Break even failure rate for up/down breakouts: 22%/23%
Average rise/decline: 38%/15%
Throwback/pullback rate: 60%/58%
Percentage meeting price target for up/down breakouts: 64%/50%

The above numbers are based on more than 1,300 perfect trades. See the glossary for definitions.

Descending Triangle: Identification Guidelines

CharacteristicDiscussion
Price trendCan be any direction leading to the pattern.
ShapeA price pattern bounded by two trendlines, the bottom one horizontal and the top sloping downward.
TouchesPrice should touch one trendline at least three times and the other trendline at least twice as distinct peaks or valleys.
CrossingThis is important: Price must cross the pattern from trendline to trendline, nearly filling the available space. Avoid descending triangles with abundant white space.
VolumeRecedes 78% of the time and gets quite low just before the breakout.
BreakoutCan be in any direction but is upward 53% of the time.
ConfirmationThe pattern confirms as a valid one when price closes outside one of the trendlines.

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Descending Triangle: Trading Tips

Consult the associated figure on the right.

Research shows that after the breakout, the market turns when it reaches the triangle apex.

Trading TacticExplanation Descending triangle chart pattern measure rule
The Measure Rule
Measure ruleCompute the height from the highest peak (A) to the horizontal trendline (B) and then multiply it by the above 'percentage meeting price target.' Add (upward breakouts) or subtract (downward breakouts) the difference to the breakout price (the point at which price crosses the trendline) to get a price target (C).
BustedPrice sometimes breaks out in one direction and then reverses to bust out in a new direction. Trade the new direction for a powerful move.
BreakoutThe median distance to the breakout is 61% to 65% of the way to the triangle apex (where the trendlines join).
TrendTriangles that appear far up a rising price trend tend to flame out quicker. Look for triangles with upward breakouts near the start of an uptrend.
ContinuationIf price rises into the pattern it breaks out upward 63% of the time.
Volume trendIf volume slopes upward, the median performance improves dramatically. Score your pattern for performance
Yearly lowDownward breakouts within a third of the yearly low do well. Upward breakouts do best either within a third of the yearly high or low (stay out of the middle third).
Throwbacks and pullbacksThrowbacks and pullbacks hurt performance.

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Descending Triangle: Example

Descending triangle chart pattern example

This descending triangle chart pattern obeys the identification guidelines set for the pattern. At point A, price peaks below the horizontal trendline but few chart patterns are perfect. At point B, price stages a breakout and that results in a swift upward move. Such a strong advance is unusual.

-- Thomas Bulkowski

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See Also

 

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