Welcome to Bravechart. Your in-depth article on chart analysis from a Scotsman stationed in the Outback.
As traders, we use technincal analysis as a reliable method for speculating on future price direction of both equities (shares) and indexes. Technical Anyalysis in simple terms is the study of historic price movements in a chart in search of patterns or consistantly 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 channelling 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: Caltex Australia Limited (CTX)
Caltex has been on a long-term downtrend for over a year now, when the share price was at a high of $37. Ever since the peak of 2018 we have seen the share price slowly falling and it has recently tested key support at $25.50. With the chart below now showing a signal that a descending triangle has formed, we will likely see CTX drag itself lower and come back to test that key support level ($25.50). The move does still have a little while to go to play out, but at this stage we are witnessing a classic descending triangle pattern. The key levels to watch are if CTX breaks the downtrend or sells off quickly and trades below the support level. If you are following Carlo’s trading rules, you will remember that once a stock has broken out of triangle, it will likely continue in that direction for a few days.
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.
Contact us today on 03 8080 5788.