Even if it is considered a semi bearish chart pattern, it has to be traded with confirmation.
There are a lot of examples when the price went up after this pattern was formed so you should be aware of the bullish scenario as well.
Without further ado, let’s go through both scenarios.
Since we are talking about semi bearish chart pattern, we would like to cover bearish scenario first.
How to trade bearish scenario?
After spotting descending triangle formation, you are waiting to see where it is going to break.
For the bearish scenario, you need two confirmations.
The first confirmation is a move down, outside of the triangle.
By breaking below the support, it makes lower low and after making lower high previously, it forms a bearish market structure.
Because of that, you have to look for a short trade setup or to sell coin since you do not want to trade against the market trend.
After getting first confirmation, you have to look for the second one that will be a bearish retest of broken support.
By creating a bearish sign on the retest, the price gives you a clear indication of the weakness in the market and confirmation you were looking for.
The setup is ready, and you have an opportunity to open a trade if the risk-reward is profitable.
The bearish sign would be something like a bearish pin bar or bearish engulfing candlestick.
If the price doesn’t show you bearish sign and enters back inside the area of the triangle, the first confirmation is invalidated together with whole trade setup.
You need to look for a new chart setup and not force the trade without getting confirmation.
How to trade bullish scenario?
Bullish scenario is not a rare situation and you should know the strategy in order to trade it well.
It needs two confirmations as well as bearish one.
The first confirmation is a move up outside of the triangle area.
Once you see a closure outside of triangle, you should start looking for the second confirmation that would be a bullish retest of broken resistance.
The first area that could become support is the area of confirmed lower high.
If the price shows the bullish setup in that area, it could be considered as a very bullish sign, and you have an opportunity for trade.
The bullish sign could be a bullish pinbar, bullish engulfing or some other bullish setups.
If that area doesn’t give you a sign, the next area to look for a sign is the downsloping resistance.
In that area, if you get bullish price setup, you can consider opening long trade or buying a coin.
The second scenario should give you very bullish sign to consider it as an opportunity because it usually doesn’t make either higher low or higher high and that’s why it has to be considered as a semi-bullish scenario until it shows some strong bullish momentum.
If neither of these two offers you bullish trade setup and price enters back to the area of the triangle, the setup is invalidated and you should look for new one.
The problem with the bullish scenario is even when it closes above resistance, it doesn’t make either higher high or higher low and can’t be considered bullish.
That’s the main reason why this pattern is considered semi bearish because the bullish side is usually not that clear and it requires several confirmations.
On the other side, once price closes below the support, you have a clear area to look for selling or short entry, and that’s the reason why the move down is usually much more impulsive while the move up usually goes in a couple of stages.
The first stage is actually creating a higher high – higher low formation and then the price accelerates.
Milos is an independent trader, with a background in journalism and publishing. Nomadic by nature, he’s lived in four different countries this decade. He’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives. Milos got into Bitcoin while completing his degree and hasn’t looked back since, writing about anything crypto-related. He is the co-founder of the Cryptoaims and he has a strong passion to educate people about this revolutionary technology.