Written by and copyright © 20052019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.
DownSloping Trendlines: Summary
Price follows trends. When
you draw a downsloping line along the price peaks, price often touches the line and falls away
without piercing it. The line is called a trendline because it shows the price trend.
$ $ $
For more information on this pattern, read
Trading Classic Chart Patterns,
pictured on the right, pages 9 to 28.
If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks.  Tom Bulkowski
$ $ $
Down Sloping Trendline Chart Pattern


DownSloping Trendlines: Identification Guidelines
Characteristic  Discussion 
Log scale  Use the logarithmic scale. Price will signal a trend change sooner on the log scale than on the arithmetic scale. 
Minor highs  Draw a downsloping trendline along
the price peaks. That way, when the trend changes from down to up, you'll know with a trendline pierce. The numbers
in the above chart show price touching the trendline five times. 
Touches  The more touches a trendline has the more powerful the move after a trendline pierce. 
Spacing  Widely space touches (over the median 29 days each) suggest a more powerful move post breakout. 
Length  Long trendlines (more than the median 139 days) are more important than short ones. They lead to more powerful rallies after the trendline pierce. 
Slope  Shallow trendlines (up to 45 degrees) are more reliable than steep ones (over 60 degrees). Again, they lead to more powerful moves after the trendline pierce. 
Volume  A downward volume trend results in a more powerful rally after the trendline pierce. 
In each of the above categories,
I examined over 200 trendlines and evaluated the price performance after price
closed above the downsloping trendline. I
tracked price until it peaked and dropped by at least 20% (a trend change). The
move from the trendline breakout
price to the high price was the measure.
For example, I found 85 trendlines
with 3 price peaks touching the trendline. Price after the breakout climbed 33%.
This compares to a rise of 38% from 63 trendlines
with 4 touches, 57% rise from 40 trendlines with 5 touches, and so on. I concluded
that the more touches, the more powerful
the rally after the trendline breakout. Consult my Trading Classic Chart Patterns book
for more information on the results.
DownSloping Trendlines: The Measure Rule
Use the measure rule to predict
how far price will rise after an upward breakout (a price pierce) from the
trendline. The figure to the left shows a downsloping
trendline with price breaking out upward at point B. From the breakout, find the
prior minor high trendline touch. I show
it as point A. Measure the widest distance between those two points, measured
vertically. In this case, that's the distance
from C to D. Multiply that distance by 80% because that's how often this
method works when a full height is used, and
project the result upward from the breakout price – the point where price
pierces the trendline.
For example, if the low at
C is 10 and directly above that at point D, the trendline is at 12, the difference
is 2. Multiply this by 80% to get 1.60.
Suppose the breakout at point B is at 11. That would give a price target of 12.60
(11 + 1.60).
 Thomas Bulkowski
Written by and copyright © 20052019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.
People with braces put their money where their mouth is.
