Rising Wedge & Falling Wedge

Both Rising Wedges and Falling Wedges indicate a pause in a given trend, thereby suggesting a period of indecision among traders. They could signify a reversal or a continuation of the trend.

Rising Wedge Chart

A Rising Wedge can be either a reversal or a continuation pattern, depending on whether it occurs after an uptrend or a downtrend. However, a Rising Wedge is a bearish chart pattern, which means that it is almost always followed by a downward trend.

This pattern is formed as price consolidates between upward support and resistance lines. If a Rising Wedge occurs after a downtrend, it emerges as a continuation pattern. As the chart shows above, this is because the price soon breaks past the resistance line and continues to fall even further.

However, if a Rising Wedge succeeds an uptrend, it occurs as a reversal pattern. As the chart shows below, this is because the price soon breaks past the resistance line and starts heading downwards.

Traders can go short after they spot a Rising Wedge, expecting the price to fall.

Rising Wedge Chart

The Falling Wedge pattern can also be either a trend reversal or trend continuation sign, depending on the details of its formation. Unlike the Rising Wedge, the Falling Wedge is a bullish chart pattern, indicating the commencement of an uptrend.

Falling Wedge Chart

As you can see from the chart above, a Falling Wedge after a downtrend indicates a reversal. Conversely, and as the below chart shows, a Falling Wedge that occurs during an uptrend will usually lead to a continuation of the price movement.

Falling Wedge Chart

Traders can go long after the Falling Wedge comes to a close, expecting prices to rise.

Did you know?

The GBP/USD pair is widely referred to as “cable”. The term dates back to the 19th century, during which the exchange rate between the U.S. dollar and the British Pound was transmitted across the Atlantic via a huge cable that ran across the ocean floor and connected the two countries.

Word of the day
"Chart Pattern" - A specific formalised shape, created by an asset’s ever-changing price, indicating potential future price movement.
Pro Tip

Always have an exit strategy.

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