• There is an upward trend before the start of the pattern.
• There is a downward trend during the formation of the pattern.
• In most of the cases, price continues to drop further, indicating a trend continual.
• Three peaks are observed during the formation of the pattern such that each peak is lower than its previous peak, indicating a downward trend.
• Also the shape of the peaks formed should be similar, i.e., if the first peak is wide, the next peak should be wide and similar to the first peak.
• This pattern is confirmed only if the price goes below the lowest valley in the pattern.
• Generally, there is approximately a 15% decline in the price level since the start of the pattern.

This is the 1 day chart of Axis Bank (NSE) around Feb-April, 2012

• Calculate the price difference between the highest peak and the lowest valley formed in the pattern. Multiply it with the percentage meeting price target (~23%).
• Subtract the aggregate value from the lowest valley to get the downward price target.
• Traders can enter the market and initiate their short position after the pattern is confirmed. A stop order can be placed slightly above the most recent peak.
• If price rises above any of the peaks, traders should immediately execute short covering.
• In some of the cases, the first valley formed is much lower than the second valley. In such cases, traders who want to enter the market should take the low of the second valley as the confirmation price.