Descending Channel

  

Categories: Charts, Trading

When your bottle of perfume continues to evaporate and/or get used up and out, it is a descending Chanel (number 5 is our fave, but can really be any number).

A Descending Channel, however, is different. It is, in fact, a stock trading pattern, in which a given stock started at, say, $25, then missed its quarter and dropped to $23 fast. It then suffered more bad news, plus rumors of an accounting restatement—and the stock dropped another $4.

It has accelerated its decline and is now in a pattern of a descending channel, which is usually a bearish sign for stock traders who stare at charts to try and glean the future of stock trades.

See: Chartist. See: Technical Trading. See: Ascending Triangle. See: Descending Triangle.

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Finance: What is a Chartist?26 Views

00:00

Finance allah shmoop What is a chartist Well here's a

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chart and here's a chart and here's a chart All

00:11

right Well these are pages from the investing bible of

00:15

a chartist A chartist is an investor really a traitor

00:19

as they tend to own stocks for a much shorter

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period of time than a longer term Really invest or

00:26

type person a chartist relies solely on the patterns The

00:31

pattern's right there These are all patterns imputed by the

00:34

charts that they you know sitting poor threw for hours

00:38

and hours So check out this chart see how the

00:40

plotted data closely follows the characteristic line there The characteristic

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line basically is plodded through all those dots Yes So

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they're going to stare at that try to figure out

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where that line is going in the future right Get

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the crystal ball or all right Well let's look at

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this one where the data forms what looks like Well

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the head and shoulders of someone who you know doesn't

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have a neck that's Just common pattern in trading And

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you know if you stopped looking at it and two

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thirds of the way through there it's heading down Well

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Maybe you'd be short the stock for a few days

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and then you see it bottoming and then you'd be

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long and try to make money that way Good luck

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All right len look at this chart Where is right

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here where the data appears to We'll break away from

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the established pattern which was all just kind of boring

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Lee along down here And then suddenly everything goes up

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Yeah start doing its own thing Well maybe the company

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reported a good quarter or ah you know the government

01:31

cut taxes again Everything went up So these were the

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tools of the chartist The chart's a chartist is the

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opposite of a fundamental investor meaning that she doesn't know

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or care what the company does for a living Really

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she doesn't care about their p e ratio nor their

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profit margins nor their debt levels on their balance sheet

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nor much of anything fundamental about how their business runs

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Chartist just care about the pattern they glean from the

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charts and all the charts always work until they don't

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And what happens when the meteor hits that is that 00:02:06.0 --> [endTime] predictable on a chart Ah

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