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Trend

There must be a trend on the market for a few months to talk about a trend continuation pattern. Symmetric Descending Triangle is a consolidation period of the current trend.

  • Role: Continuation
  • Expected trend: Bearish
  • Previous tren: Bearish
  • Reliability: High
  • Pattern: Triangle
Symmetric Descending Triangle Example

Symmetric Descending Triangle Example

Four points

At least two points are needed to get a trendline. Two trendlines build up a Symmetric Descending Triangle. Consequently, at least four points are needed for a Symmetric Descending Triangle. The maximum values are decreasing, so does the top trendline. The minimum values are increasing, so does the bottom trendline. Ideally, the pattern has 6 points before breaking out from the channel.

Volume

As the pattern develops and the trading range narrows, the trading volume decreases. At the breakout, the volume increases.

Duration

The duration can last from a few weeks to a few months. If the duration is shorter than 3 weeks, the pattern is called a Pennant. Typically, the pattern lasts for 3 months.

Breakout timeframe

The ideal breakout point is between the ¼ and ½ of the pattern or the duration. The duration of the pattern is the time passed from the beginning of the bottom trendline to the peak. Too early or too late breakouts are irrelevant. When the trend lines are getting close to each other, traders must prepare for a breakout.

Breakout direction

One cannot predict the direction of the breakout only if it happened already. Guessing the breakout’s direction can jeopardize the investment. Traders may expect trend continuation patterns to break out in the trend’s direction, which happens in 75% of the cases. In 25% of the cases the breakout happens in the opposite direction.

Breakout confirmation

To confirm the breakout, the trading day must close first. Some traders set up price (exceeds 3% of the trendline) or time (the price does not rise above the trendline for 3 days) limits. The breakout happens with large trading volume (especially when it is an upward breakout).

Pullback to the breakout

After the breakout, the support and resistance lines are the extensions of the trendlines. Sometimes the share price moves back to this line before continuing the movement in the breakout’s direction.

Target price

There are two methods to determine the target price after the breakout. First, the longest distance of the Symmetric Triangle is determined and set perpendicularly at the breakout point. Second, another line is drawn in the breakout’s direction, and in parallel with the opposite trendline. Its starting point is the pattern’s starting point. This line will determine the target price.