Welcome to Bravechart. Your in-depth article on chart analysis from a Scotsman stationed in the Outback.
As traders, we use technical analysis as a reliable method for speculating on future price direction of both equities (shares) and indexes. Technical Analysis in simple terms is the study of historic price movements in a chart in search of patterns or consistently traded support and resistance levels. Today we are looking at a specific chart pattern that falls under continuation patterns, the Descending Triangle.
Appearance: A Descending Triangle pattern is comprised of:
- A down trending stock that has lower peaks and troughs.
- A support level where the stock is channeling towards.
- Both trend lines create a triangle forming in the bottom right of your chart.
Important Note: Be aware, this pattern will not be confirmed until the share price breaks through the support level and continues the downtrend.
Example: APA Group (APA)
APA has been in a downtrend for over three months now and is showing the descending triangle pattern. As you can see from the below chart, APA is bouncing off the downtrend, creating lower peaks and troughs, and staying above the support level at $8.57. If the pattern continues we will likely see APA get squashed tighter and tighter inside the triangle until the breakout. The share price will then likely continue in the direction of the break-out for a couple of days. For this to happen, we would see APA fall another ~$0.25 in the coming week or weeks.
There are many ways that you could take advantage of these patterns. As a specialist in derivatives, we are able to profit on a stock when it falls as well as when it rises.
If you would like to learn how to pick a stocks direction, then Join us at our live face to face one day “Technical Analysis, Picking the Direction of a Stock” course.
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