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Descending Triangle Pattern
The Descending Triangle is a significant chart pattern used in technical analysis, suggesting a continuation of a bearish trend. It is characterized by a series of lower highs and a steady support line, forming a triangle that slopes downwards.
Features of the Descending Triangle Pattern:
- This pattern emerges when the price action makes lower highs, indicating that each rally is weaker than the last.
- The lower highs form the upper line of the triangle, which slopes downwards.
- A flat support line forms the base of the triangle, reflecting a consistent price level that the market is struggling to fall below.
- The converging of these two lines indicates the likelihood of a downward breakout, as the price narrows within the triangle.
In the Descending Triangle function:
- The logic necessary to identify the descending triangle pattern is applied to an array of price data over several periods.
- It starts with the initial high value, from which a decrease is sought, and an initial low value, which should remain constant.
- The function checks for gradually decreasing high values, indicating the formation of the triangle's upper line.
- It also verifies that the low values remain relatively constant, which would form the triangle's base.
Traders often view the Descending Triangle as a bearish signal and may consider it an opportune moment to take short positions. However, it is crucial to wait for a confirmed breakout below the support line before making trading decisions. As with all trading patterns, it is advisable to use additional indicators to confirm the trend.