Yet, their behavior and potential remains the same. This is when the two types of wedges switch their roles. However, since the equity is moving downwards, our rising wedge pattern implies trend continuation and the falling wedge pattern – trend reversal. Hence, they are bearish wedge patterns in the short-term context.Ĭonversely, during a downtrend, we have the exact same scenario – price is likely to increase after a falling wedge pattern and price is likely to decrease after a rising wedge pattern. After the two increases, the tops of the two rising wedge patterns look like a trend slowdown. For this reason, they represent the exhaustion of the previous bullish move. ![]() Notice that the two falling wedge patterns on the image develop after a price increase and they play the role of trend correction.Ĭonversely, the two ascending wedge patterns develop after a price increase as well. There are two falling and two rising wedge patterns on the chart.Īs previously stated, during an uptrend, falling wedge patterns can indicate a potential increase, while rising wedge patterns can signal a potential decrease. Rising and falling wedge continuation patternsĪs you can see from this 10-minute chart of GM, it is in a strong uptrend, which is tested a total of 9-times 9 (the blue line). ![]() Take a quick look at the image below, which shows how ascending and descending wedges behave during a bullish market: Wedge Chart Pattern Trend Continuation Example Ultimately, the price action will break to the downside. The difference is that rising wedge patterns should appear in the context of a bearish trend in order to signal a trend continuation. The same applies for rising wedge patterns. Thus, we expect a price breakout from the wedge to the upside. In this case, the descending wedge represents a correction. For example, imagine you have a bullish trend and suddenly a falling wedge pattern develops on the chart. Wedge Stock Pattern – Trend Continuationĭuring a trend continuation, the wedge pattern plays the role of a correction on the chart. The answer to this question lies within the events leading up to the formation of the wedge. You may be thinking, “But how is it possible for a pattern to have two very different outcomes?” It all depends on the direction of the primary trend, and the context of the volume and price action. Let’s be clear once again: rising and falling wedge patterns could result in a continuation or reversal. Predicting the breakout direction of the rising wedge and falling wedge patterns This is likely due to accumulation efforts.įor this reason, it is commonly known as a bullish wedge if the reaction is to the upside as a breakout, aka a falling wedge breakout. As this “effort” to push the stock downward increases along the lows, you’ll notice that the result of the price action is diminishing. Bullish Wedge PatternĪs a bullish descending wedge pattern, you should notice that volume is increasing as the stock puts in new lows. Much like our discussion above on ascending wedges, this descending wedge pattern should display the inverse characteristics of volume and price action. Opposite to rising wedge patterns, falling wedge patterns are typically a bullish wedge, which implies the price is likely to break through the upper line of the formation. The below image illustrates the rising wedge pattern formation:Īs you can see, the bottoms are decreasing, but the tops are decreasing at a faster pace. Therefore, the wedge is like an ascending corridor where the walls are narrowing until the lines finally connect at an apex. The rising wedge pattern develops when price records higher tops and even higher bottoms. ![]() They are also known as a descending wedge pattern and ascending wedge pattern. What do rising wedge and falling wedge patterns look like?Īlthough many newbie traders confuse wedges with triangles, rising and falling wedge patterns are easily distinguishable from other chart patterns. How to practice rising and falling wedge patterns.Wedge Strategy – When should you take profits?.Wedge Strategy – Where should you place your stop loss?.How to trade ascending and descending wedge patterns?.Wedge Chart Pattern Trend Continuation Example.Wedge Stock Pattern – Trend Continuation.Predicting the breakout direction of the rising wedge and falling wedge patterns.What do rising wedge and falling wedge patterns look like?.
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