Descending Triangle

Posted in Finance, Accounting and Economics Terms, Total Reads: 209

Definition: Descending Triangle

This is used in technical analysis of stocks. From the figure attached below, we can make out that the stock price is continuously falling, that is, it is following a bearish trend. This triangle is obtained by the convergence of two lines – one horizontal support line and the other downward sloping resistance line.

When the price of the stock is falling, the traders are try to maintain a minimum price and that is indicated by the horizontal support line. As a result, the stock price again moves higher, but this is comparatively lower to the previous high price. Then again price starts dropping and the process continuous.

Once a point is reached where it is impossible to maintain the minimum price and then, the price falls drastically, The sellers overpower the buyers and the stock price falls down. Technical analysts can help make profits over a brief period of time in the downtrend.



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