That is to say that a rising wedge pattern can form near the terminal point of a bullish trend. A common stop level is just outside the wedge on the opposite side of the breakout. Wedge patterns often occur at the terminal point of a trend. The target can be estimated through the technique of measuring the height of the back of the wedge and extending it in the direction of the breakout. These wedges tend to break upwards.Ĭonservative traders may look for additional confirmation of price continuing in the direction of the breakout. In other words: the highs are falling faster than the lows. The second is Falling wedges where price is contained by 2 descending trend lines that converge because the upper trend line is steeper than the lower trend line.

In other words: the lows are climbing faster than the highs. The first is rising wedges where price is contained by 2 ascending trend lines that converge because the lower trend line is steeper than the upper trend line. There are 2 types of wedges indicating price is in consolidation. Measure the height of the pattern (in its widest side) in terms of pips, and then subtract/sum the same amount of pips from the eventual break out level.The Wedge pattern can either be a continuation pattern or a reversal pattern, depending on the type of wedge and the preceding trend. The pattern is not complete until the market breaks the resistance trendline. This falling wedge is a reversal pattern because the slope (downward) of the wedge is in the same direction of the trend (downtrend). In this case the market was trending up and the slope of the wedge is upward. The slope of the wedge is in direction of the trend. What makes this wedge a reversal pattern? This pattern is completed when the price breaks through the resistance trendline. Two or more touched points are required to form the converging trendlines. The highs and the lows of the pattern form a falling wedge. It starts out wide, but narrows as prices keep going down. Reversal falling wedges are a bullish reversal pattern. The market movement after a wedge or any reversal pattern could produce: a trend reversal, the beginning of a retracement or a consolidation period. Notice the reversal rising wedge here forecasts a retracement, not a trend reversal. The pattern is completed when the market breaks the support-trendline. This rising wedge is a reversal pattern because the slope (upward) of the wedge is in the same direction of the trend (uptrend). The pattern is completed when the price breaks the support trendline. Starts out wide, and narrows as the market reaches new highs forming a rising wedge when two or more points are connected. Reversal rising wedges are a bearish reversal pattern found at the end of the uptrend. This pattern begins wide and contracts as the market keeps rising: When the market broke the support trendline and the pattern got completed, it led to further gains. This falling wedge is a continuation pattern because the slope (downward) of the wedge is against the direction of the trend (uptrend). The slope of the wedge is against the previous trend. What makes this wedge a continuation pattern? Continuation Falling WedgeĬontinuation falling wedges are a bullish continuation pattern. When the pattern got completed (support trendline got broken), led to further downside movements. This rising wedge is a continuation pattern because the slope (upward) of the wedge is against the trend (downtrend). This pattern is completed when the price breaks through the support trendline. In the case of rising wedges, this breakout is usually bearish. Like head and shoulders, triangles and flags, wedges often lead to breakouts. It starts out wide, but narrows as prices keep going up. To form a rising wedge, the support and resistance lines both have to point in an upwards direction and the support line has to be steeper than resistance.

Continuation Rising WedgeĪs all wedges, this one begins wide and contracts as the market reaches new highs:Ĭontinuation rising wedges are a bearish continuation pattern. Depending on where the pattern was formed and its slope it could signal a continuation of the trend or a trend reversal. The reason is simple, these patterns can be either reversal or continuation patterns. You may wonder why is it that we have the falling and rising wedge in a separate section.

Rising wedge vs falling wedge