![]() ![]() In either case the breakout should occur to the upside and lead to higher prices. In the case where the falling wedge pattern occurs within an overall uptrend, and can be seen as moving against the uptrend, it would be considered a continuation pattern. In this scenario, the falling wedge pattern would be classified as a reversal pattern. When the falling wedge pattern appears in the direction of the downtrend and near the end of a sustained price movement lower, the implication is for the current downtrend to end, as demand enters the market pushing prices to higher levels. The falling wedge pattern can also be a terminal pattern or a continuation pattern. As such, a falling wedge structure is considered a bullish wedge pattern in terms of its price potential. When the price breaks above this upper trendline, prices will often be propelled higher into a new trend leg. In the case of a falling wedge pattern the most important line to watch for is the upper resistance line. The upper trendline represents diagonal resistance, while the lower trendline represents diagonal support. But in this case the two converging trendlines that contain the price action will be pointing downward. The falling wedge pattern will also be outlined using two contracting trendlines. The illustration below shows what the falling wedge pattern appears like. Let’s now take a look at the opposite scenario with the falling wedge pattern. And that is to say prices should move lower following the downside break out. ![]() In either case, the implications for the rising wedge pattern are the same. ![]() When the rising wedge formation occurs within this market context, it is considered as a continuation pattern, meaning that, the breakout should occur at the lower trendline and lead to continued bearish price movement. The rising wedge can also occur within the context of a down trending market. When the rising wedge appears in the direction of the uptrend and after a prolonged price move higher, the most likely implication is for a reversal of the current trend. The rising wedge is often seen at the end of a bullish price move. As such a rising wedge structure is considered a bearish wedge pattern in terms of its price potential. We expect that the price will break this lower trendline, which will lead to a bearish price move. The most important level to watch for within the rising wedge pattern is the lower support line. Both lines are clearly pointing upward and are converging towards each other. Notice the upper line of the rising wedge pattern which represents the diagonal resistance level for the price action, and how the lower line of the rising wedge pattern represents the diagonal support level for the price action. The rising wedge pattern can be seen as two contracting trendlines sloping upward and wherein the majority of the price action is contained within these trendlines. Below you will see an illustration of the rising wedge pattern. Let’s now take a closer look at the rising wedge pattern. And similarly the price action following the break of the upper line within a falling wedge will often lead to a sharp reversal to the upside. The price action following the break of the lower line within a rising wedge will often lead to a sharp price reversal to the downside. When the wedge pattern occurs in the direction of the trend and within the late stages of the trend is considered a reversal pattern. Elliott wave traders will recognize the technical wedge formation as an ending diagonal. That is to say that a rising wedge pattern can form near the terminal point of a bullish trend, while a falling wedge pattern can form near the terminal point of a bearish trend. Wedge patterns often occur at the terminal point of a trend. As such, these formations are sometimes referred to as a triangle wedge. Often the wedge pattern resembles a triangle formation that has been tilted either up or down. We will detail all of these different types of wedge structures as we move through this lesson, however, for now it’s important to understand that a wedge pattern is a prolonged consolidation pattern that can form in both up trending and down trending markets. When this occurs the wedge structure can be further classified as either an ascending wedge, or a descending wedge. In rare cases, a wedge pattern can form as a broadening or expanding variation. Most wedge patterns form as a contracting variety, and the contracting variety can be classified as a rising wedge or a falling wedge. Volume will also contract during the formation of a wedge pattern. Wedge patterns are considered consolidation phases wherein there is a contraction within the price movement. ![]() Click Here To Download Wedge Chart PatternĪ wedge pattern is a corrective price structure that often precedes a new trend leg. Download the short printable PDF version summarizing the key points of this lesson…. ![]()
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