Although there are many tools that can be used to help this process, all good traders will look for patterns in the price charts. Its opposite is a falling wedge.When looking to make the right trading decision, a certain amount of technical analysis is required. Very wide rising wedges give better performance than narrow rising wedges.įor your information: A rising wedge is a reversal chart pattern. The break out point (exit) generally occurs at 60% of the length of the rising wedge. Pullbacks are detrimental to the pattern’s performance. Retracements are generally twice as fast as the rising wedge was in its formation. Exploiting a false bearish break is therefore statistically low risk. If a false bearish break occurs, the exit will be upwards in only 3% of cases. False breaks (or false exits) give an indication of the direction of exit.
The steeper the rising wedge’s trend lines (rising strongly), the more severe the downward movement is at the breakout (exit from the chart pattern). The contact points on the rising lines must be significant because otherwise it might be a flag. In 27% of cases, false breaks (false exits) appear. In 53% of cases, the price makes a resistance pullback on the rising wedge’s support line.
In 63% of cases, the pattern’s price objective is achieved when the support line is broken. In 55% of cases, a rising wedge is a reversal pattern. Graphical representation of a rising wedge NB: it is often observed that the steeper the rising wedge’s trend lines, the faster the price objective is reached. The price objective is determined by the lowest point that caused the wedge to form. This break out is generally accompanied by high volumes. The movement then has almost no buying power, which leads to a bearishreversal.Ī break of the support line definitively validates the pattern. Volumes are then at their lowest point and decrease as the waves increase.
A third wave is then formed but the prices increase less and less in contact with the support. A second wave of increases then occurs, but of a lesser magnitude, signalling an inadequacy of buyers. The lowest point reached during the first correction on the rising wedge’s support line forms the support. Buyers find it increasingly difficult to get the price to rise above the support line. The convergence of the two lines in the same direction (a decrease in price magnitude) tells us that prices continue to rise with lower and lower movement magnitude. This implies that the rising 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 rising wedge marks the exhaustion of the buying trend. 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 converging bullish lines.Ī rising wedge is confirmed/valid if it has good oscillation between the two bullish lines. A rising wedge is a bearish chart pattern (said to be "of reversal").
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