Generally, markets indecision should be resolved by the fifth swing, after which the price supposedly should choose a direction to follow. Second, a perfect wedge consists of 5 swings within its range, and although this is not mandatory, it does make the pattern more reliable.

First, the greater the wedges slope is, the stronger the breakout usually is. There are several other things you need to consider. It is even better to wait for a break below the wedges latest low, in order to be absolutely assured, it wont be a false breakout. Such a signal is generated when the price breaks through the support zone, preferably accompanied by increased volume, and closes a candle beneath it. However, we can not be sure that the bears have overcome the bulls until we have a proper confirmation. Having noticed that we may have a Rising Wedge, we anticipate that a price reversal might come soon. In a Rising Wedge, the subsequent advances from the lows become shorter over time, which is why the resistance line basically slows down and is not as steep as the support, eventually converging with it. If price movement forms these support and resistance lines in such a way that they are sloping and will eventually converge as the pattern matures, then we have a wedge. In both cases, just as the highs, each low should be higher than the previous one. If you have a Rising wedge within a downtrend, then the support zone will require at least two lows. The support line, in case the wedge encompasses the whole trend, is basically a trend line, which requires the connection of three lows. The upper line (resistance) requires at least two highs in order to be formed, but may also include three, and each of them should be higher than the preceding one. The formations boundaries are basically a support (or a trend) line and a resistance line. Sometimes the entire trend movement is contained within the wedges boundaries, while in other cases, it can form after a correction (when it coincides with the trends direction). Wedges are a mid-term or long-term patterns and depending on the time frame, they could take several months to form. Wedge formation and elementsīecause wedges are trend continuation or reversal patterns, there must be a trend to continue or reverse. Logically, all Falling Wedges, both in an uptrend and a downtrend, are bullish.

Keep in mind that regardless which of the upper two scenarios we have in front of us, all Rising Wedges are bearish. It is usually a temporary price movement to the opposite side, a retracement. However, a rising wedge during a downtrend, as illustrated on the next screenshot, often acts as a continuation pattern. Often, such a scenario during an uptrend acts as an early sign of a possible price reversal.

One is visualized below.Īs you can see from the picture, the market is forming higher highs and higher lows, but because the lows are being formed faster than the highs, the support line is steeper than the resistance. In our case, a Rising Wedge is a price action zone, bound between upward sloping support and resistance lines. The price forms highs and lows in the same direction, but the pace at which the two types of extremes are formed differs. In general, a wedge is a market consolidation zone, bound between two sloping support and resistance lines, which would eventually converge.

Stock market rising wedge