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DESCENDING TRIANGLES


Which Way Is The Nasdaq Headed?

02/06/03 09:50:46 AM
by Dennis D. Peterson

A descending right triangle seems to have formed.

Security:   N/A
Position:   N/A

Right triangles are one of the more reliable patterns. Looking at daily data for QQQ you see a price pattern closely resembling a descending right triangle (Figure 1).

Figure 1: Daily QQQ Price And Volume. Trendlines drawn along the peaks and valleys of recent price history nearly forms a descending right triangle.
Graphic provided by: MetaStock.
Graphic provided by: Data Vendor: eSignal.
 
The price pattern is only close to a descending right triangle because the bottom trendline is not perfectly horizontal; however, with an upsloping bottom trendline the pattern forms a bearish wedge. Either way, wedge or triangle, the pattern favors bears and shorts. Does the Nasdaq composite say anything different?




Figure 2: Daily Nasdaq Composite Price. A gap down is a strong indication that the triangle base will be the target before a reversal is seen. Currently, 1150 is in play.

The Nasdaq composite gives a clearer picture that we have descending right triangle and today's gap down only confirms a move down. Ideally prices would been coming down into the pattern. Nevertheless the odds favor shorts. VXN should confirm.



Dennis D. Peterson

Market index trading on a daily basis.

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E-mail address: dpeterson@traders.com

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