Volume declines throughout the duration of the pattern. A valid rising wedge should contain at least five touches of the two trendlines, with two touches of one trend line, and three of the other. The two converging lines will further confine the price action until there is a bearish breakdown or bullish breakout. The rising wedge pattern is the former, which is typically associated with downtrends and bearish results. The wedge is a triangle-like pattern where a resistance and support line rise or fall to converge into the shape of a wedge. What Is A Rising Wedge Pattern And How Does It Work? We’ll also provide tips on how to prepare for the rare event where a rising wedge has a bullish breakout. This guide will provide examples of a rising wedge in an uptrend and a rising wedge in a downtrend, along with how to trade them. Still, no chart pattern is reliable all the time. Certain characteristics that fit the profile of a bearish rising wedge pattern can help traders and analysts validate the pattern and increase the probability of success. The rising wedge chart pattern is a bearish pattern, but does occasionally break up to keep traders on their toes and guessing. Few trading patterns are as easy to identify and trade as the rising wedge pattern. Its opposite is an ascending broadening wedge.Technical analysis patterns come in various shapes and sizes, with some being more bullish or bearish, while others are neutral. In 40% of cases, the price makes a pullback in support on the descending broadening wedge’s resistance line.įor your information: A descending broadening wedge is a reversal chart pattern. In 81% of cases, the pattern's price objective is achieved when the resistance line is broken. In 23% of cases, a descending broadening wedge occurs in a consolidation movement. Statistics of the descending broadening wedge after a bullish movement NB: pullbacks are harmful to the pattern’s performance. The price objective is given by plotting the wedge’s maximum height onto the breaking point Resumption of the bullish movement after correction. CASE 2: formation of a descending broadening wedge after a peak This type of pattern appears during the correction in a bullish movement, it is a bullish continuation pattern. In 21% of cases, the price makes a pullback in support on the descending broadening wedge’s resistance line. In 60% of cases, a descending broadening wedge’s price objective is achieved when the resistance line is broken. In 75% of cases, a descending broadening wedge is a reversal pattern. NB: often, the steeper the descending broadening wedge’s trend lines, the faster the price objective is reached. The price objective is determined by the highest point at which the descending broadening wedge was formed. The break in the resistance line definitively validates the pattern. CASE 1: formation of a descending broadening wedge after a trough This type of pattern appears on the troughs, it is a bullish reversal pattern. A third wave forms afterwards but the sellers lose control again after the formation of new lowest points.ĭuring the formation of a descending broadening wedge, volumes do not behave in any particular way but they increase strongly when the support line breaks. A second wave of decline then occurs of more magnitude, signalling the sellers' loss of control after a new lowest point. The highest point reached during the first correction on the descending broadening wedge’s resistance line forms the resistance. The sellers manage to make the price rebound on the resistance line but lose control after the formation of a new lowest point. The divergence of the two lines in the same direction (increase in price magnitude) informs us that the price continues to fall with movements that are increasingly low in magnitude. This implies that the descending broadening wedge pattern is considered valid if the price touches the support line at least 3 times and the resistance line twice (or the support line at least twice and the resistance line 3 times).Ī descending broadening wedge does not mark the exhaustion of the selling current, but the buyers’ ambition to take control. NB: a line is said to be "valid" if the price line touches the support or resistance at least 3 times. The upper line is the resistance line the lower line is the support line.Įach of these lines must have been touched at least twice to validate the pattern. It is formed by two diverging bullish lines.Ī descending broadening wedge is confirmed/valid if it has good oscillation between the two upward lines. A descending broadening wedge is bullish chart pattern (said to be a reversal pattern).
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