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: GPT Group (GPT)
GPT has been on a sharp downtrend for the last three weeks with the recent high of $6.30 being seen – this confirmed the double top and the reversal of the overall uptrend that had formed. Since the double top, you can see from the below chart that the share price has since fallen through a recent support level, around $6.10. With the share price today holding on the descending triangle support level, we are likely to see a break out of the pattern tomorrow. If the share price can hold and continue side-wards, we will likely push higher for the days after, confirming either a side-wards channel or the start of an uptrend again. On the other hand, if the price tomorrow falls below $5.83, we will likely see a continuation of the downtrend and look towards $5.70 – $5.60 as our next support levels.
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.