Descending Triangle
A bearish consolidation pattern where sellers press prices lower while a flat support holds — until it doesn't.
Definition
A descending triangle is a chart pattern formed by two converging trendlines: a horizontal support line connecting a series of roughly equal lows, and a descending resistance line connecting a series of progressively lower highs. The shape narrows as price approaches the apex, reflecting mounting selling pressure against a stubborn demand zone. It is classically treated as a bearish continuation pattern, though a breakout in either direction is possible.
Why it matters
In Indian equity and index markets — where sentiment can shift sharply around events like RBI policy decisions or FII flows — the descending triangle is a reliable early warning that distribution is underway. Each lower high signals that sellers are willing to offload at cheaper levels, while the unchanged support shows buyers defending a key price. When that support finally cracks, the resulting breakdown often accelerates as stop-losses cluster just below it. The projected target is typically estimated by subtracting the pattern's maximum height from the breakdown point, giving traders a quantified objective. Volume tends to contract during formation and spike on the breakdown, lending additional confirmation.
How it works
To identify the pattern, draw a horizontal line across at least two matching lows (the support) and a downward-sloping line across at least two declining highs (the resistance). Price should oscillate between these lines, touching each multiple times. A valid breakdown occurs when a candle closes decisively below the horizontal support on above-average volume. Traders typically enter short on the breakdown candle or on a retest of the broken support as resistance. A stop-loss is placed just above the last lower high or the broken support level. For options traders on NSE, a confirmed descending triangle breakdown on the underlying can justify initiating bear put spreads or buying puts at strikes near the support level.
Example
Suppose a hypothetical mid-cap stock on NSE trades between a flat support at ₹500 and a descending resistance that drops from ₹560 to ₹540 to ₹520 across three weeks. The maximum height of the pattern is ₹60 (₹560 minus ₹500). If the stock breaks below ₹500 with a strong red candle on high volume, the projected target would be ₹500 minus ₹60, i.e., roughly ₹440. A trader might enter short at ₹498, place a stop at ₹510, and target ₹440 for a favourable risk-reward ratio.
Track patterns on live charts
Use TradePulse's option chain to watch open interest build near key support levels ahead of a potential breakdown.