A descending trend line is a chart pattern containing two or more lower highs that can be connected with a straight line that has a negative slope.
It is a bearish pattern created by connecting two or more highs, with each successive high lower than the previous low.
This creates a downward sloping trend line
A descending trend line is also known as a “downtrend line“.
Since technical analysis is built on the assumption that prices trend, the use of trend lines is important for both identifying and confirming trends.
A descending trend line acts as resistance and indicates that supply (more sellers than buyers) is increasing even as the price falls.
A falling price combined with increasing supply is very bearish, and shows really strong selling pressure.
As long as the price action stays below this line, it is a bearish trend.
Price can pull back as the trend line acts as resistance.
Price usually retests a sloped trend line several times, until it breaks at which point we may have a trend reversal.
The more points there are to connect, the stronger a trend line becomes.
The strength of the trend line is also determined by how many market participants recognize the trend line.
If a lot of the market acknowledges the same trend line that you see, then the trend line becomes self-fulfilling.
As long as prices remain below the trend line, the downtrend is considered solid and intact.
A break above the descending trend line indicates that buyer demand has increased and a change in trend could be imminent.
If price breaks through the descending trend line, you can go long the breakout but be aware of fakeouts (false breakouts) though.
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