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What pair has this Descending Triangle? Or is it a Double Bottom? |
What pair is this? Here's a live example to explain a couple technical price patterns, as well as point out a critical factor in technical analysis.
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The chart below is one of the majors (most of you probably know which one by now, if not, you can click here to see). We can see the formation of two very different technical patterns:
 Descending Triangle
Descending triangles form during an overall downtrend as the horizontal support level and the down-trending resistance level that encompass the consolidation zone converge. They usually indicate a continuation of the previous trend. In this case, meaning the pair would breakout and trend more to the downside.
Learn more about Continuation Patterns.
Double Bottom
Double bottoms form during an overall downtrend as the currency pair hits the same support level twice in the consolidation zone. Double bottoms are usually indicative of a reversal in the previous trend, in this case, meaning a move to the upside.
Learn more about Reversal Patterns.
So our analysis, sound as it may be, tells us two different things. So what do you do?
Well, the answer may seem simple enough, but unless you are passionate about it one way or the other, you wait for confirmation of your analysis.
So in this case, we'd watch for a breakout. If it comes to the upside and breaks the descending triangle, we may start thinking reversal and look for opportunities to profit from the new uptrend.
If it continues to consolidate within the triangle, we watch for the breakout at the convergence of support and resistance. If the downside break comes, our analysis is confirmed and we can trade the new trend.
Still don't know what pair this is? Click here to find out.
Next: Support and Resistance Levels or click on the flags for charts for each pair.
To see the rest of today's market videos and education, click here.
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