Trend
There must be a trend on the market to talk about a trend reversal pattern. The share price enters the pattern from below.
- Role: Reversal
- Expected trend: Bearish
- Previous tren: Bullish
- Reliability: Moderate
- Pattern: Triangle
Reversal Descending Triangle Example
Bottom horizontal line
There must be two minimum values to form the bottom line. These minimum points are not necessarily in line, but they must move within a given range. A certain distance must be between the maximum and minimum values.
Top trendline
There must be at least two maximum values to form the top trendline. These maximums are decreasing over time and they have a given distance between them. If the next wave’s maximum points are in the same height or above the previous ones, the pattern cannot be a reversal triangle.
Duration
The duration can last from a few weeks to a few months.
Volume
The trading volume decreases as the pattern develops. There can be a bottom breakout only if there is a high volume. A volume-based confirmation is not necessary, but highly recommended.
Pullback to the breakout
According to the technical analysis principles, the support line changes into resistance line and resistance line changes into support line. When the price breaks the bottom horizontal line of the triangle, it will act like a resistance. Sometimes the share price returns to this line before it starts decreasing.
Target price
The basis of the target price calculation is the group of days with large trading volume at the beginning of the pattern.
