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. The trend line represents the overall downward momentum of the security. The first high is usually caused by bullish investors who have driven the price up, but are no longer willing to buy at these levels. As the stock falls, it reaches new lows as bears take control and push prices even lower. This creates the second and subsequent low points on the chart.The significance of this pattern lies in its ability to predict future prices movements. A break below support from a descending trend line often signals further downside ahead for the security, as sellers continue to outnumber buyers at these levels. Conversely, an upside breakout can suggest that bulls are once again in control and prices could rise significantly from there.The key to drawing a descending trend line is to find at least two lower lows that are close to each other, along with a price level where the stock finally reverses direction. A break below support from a descending trend line often signals further downside ahead for the security, as sellers continue to outnumber buyers at these levels. Conversely, an upside breakout can suggest that bulls are once again in control and prices could rise significantly from there.
