How to trade a Descending Triangle 101
In descending triangle chart patterns, there is a string of lower highs which forms the upper line (Green). The lower line (Red) is a support level in which the price cannot seem to break.
In the chart above, you can see that the price is gradually making lower highs which tell us that the sellers are starting to gain some ground against the buyers.
Now most of the time, and we do say MOST, the price will eventually break the support line and continue to fall.
But this is XBT and the honey badger dgaf
In this case, we would place entry orders above the upper line (the lower highs) and below the support line.
However, in some cases, the support line will be too strong, and the price will bounce off of it and make a strong move up.
The good news is, like the honest badger, that we don’t care where the price goes. We just know that it’s about to go somewhere.
Typically the price will break (up or down) by around the same vertical distance as the height of the triangle.
Example: If you are feeling bullish and expecting the unlikely scenario of a price surge upwards
Placing an entry order above the top of the triangle and going for a target as high as the height of the formation could potentially yield solid profits.
This is not advice.
XBT has recently bounced from strong longterm resistance (Grey dotted line)
Personally I am still expecting more downside
I have been calling for a strong test of the bottom before bulls feel comfortable setting their sights on a new ATH, However all of the recent sideways action and ranging has me wondering of we are building a new foundation in the 9200 - 9800 area. Knowing where the bedrock is is always a comfort when betting on a bullish market.
Good luck
In the chart above, you can see that the price is gradually making lower highs which tell us that the sellers are starting to gain some ground against the buyers.
Now most of the time, and we do say MOST, the price will eventually break the support line and continue to fall.
But this is XBT and the honey badger dgaf
In this case, we would place entry orders above the upper line (the lower highs) and below the support line.
However, in some cases, the support line will be too strong, and the price will bounce off of it and make a strong move up.
The good news is, like the honest badger, that we don’t care where the price goes. We just know that it’s about to go somewhere.
Typically the price will break (up or down) by around the same vertical distance as the height of the triangle.
Example: If you are feeling bullish and expecting the unlikely scenario of a price surge upwards
Placing an entry order above the top of the triangle and going for a target as high as the height of the formation could potentially yield solid profits.
This is not advice.
XBT has recently bounced from strong longterm resistance (Grey dotted line)
Personally I am still expecting more downside
I have been calling for a strong test of the bottom before bulls feel comfortable setting their sights on a new ATH, However all of the recent sideways action and ranging has me wondering of we are building a new foundation in the 9200 - 9800 area. Knowing where the bedrock is is always a comfort when betting on a bullish market.
Good luck
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