The falling wedge is a bullish pattern. Together with the rising wedge formation, these two create a powerful pattern that signals a change in the trend direction. In general, a falling wedge pattern is considered to be a reversal pattern, although there are examples when it facilitates a continuation of the same trend.
This article explains the structure of a falling wedge formation, its importance as well as technical approach to trading this pattern. We will discuss the rising wedge pattern in a separate blog post.
Where Does the Falling Wedge Occur?
The falling wedge pattern occurs when the asset’s price is moving in an overall bullish trend before the price action corrects lower. Within this pull back, two converging trend lines are drawn. The consolidation part ends when the price action bursts through the upper trend line, or wedge’s resistance.
One of the key features of the falling wedge pattern is the volume, which decreases as the channel converges. Following the consolidation of the energy within the channel, the buyers are able to shift the balance to their advantage and launch the price action higher.
Hence there are three key characteristics of a falling wedge pattern:
1.The price action temporarily trades in a downtrend (the lower highs and lower lows);
2.There are two trend lines (the upper and lower) that are converging;
3.There is a decrease in volume as the channel progresses.
The first two elements are mandatory features of falling wedge, while the occurrence of the decreasing volume is very helpful as it adds additional legitimacy and validity to the pattern.
It may take you some time to identify a falling wedge that fulfills all three elements.
This article explains the structure of a falling wedge formation, its importance as well as technical approach to trading this pattern. We will discuss the rising wedge pattern in a separate blog post.
Where Does the Falling Wedge Occur?
The falling wedge pattern occurs when the asset’s price is moving in an overall bullish trend before the price action corrects lower. Within this pull back, two converging trend lines are drawn. The consolidation part ends when the price action bursts through the upper trend line, or wedge’s resistance.
One of the key features of the falling wedge pattern is the volume, which decreases as the channel converges. Following the consolidation of the energy within the channel, the buyers are able to shift the balance to their advantage and launch the price action higher.
Hence there are three key characteristics of a falling wedge pattern:
1.The price action temporarily trades in a downtrend (the lower highs and lower lows);
2.There are two trend lines (the upper and lower) that are converging;
3.There is a decrease in volume as the channel progresses.
The first two elements are mandatory features of falling wedge, while the occurrence of the decreasing volume is very helpful as it adds additional legitimacy and validity to the pattern.
It may take you some time to identify a falling wedge that fulfills all three elements.
Comment:
Comment:
clear break above the top trend line. get ready for a nice lil bull run guys.gg.
Comment:
spell hourly making progress. bullish movements. white lines are possible supports
spell hourly making progress. bullish movements. white lines are possible supports
Comment:
pretty glad i been stacking this entire time. bully days gents...
Comment:
still holding looking to accumulate on a correction if their is a good one.
Break even failure rate for up/down breakouts: 26%/29%
Average rise/decline: 38%/14%
Throwback/pullback rate: 62%/74%
Percentage meeting price target for up/down breakouts: 62%/29%
Characteristic: Discussion
Price trend: Can be any direction leading to the pattern.
Shape: Price follows two down-sloping and converging trendlines.
Touches: Price should touch each trendline at least five times to outline a good pattern. That's 3 touches of one trendline and 2 of the opposite.
Duration: 3 weeks is the minimum duration, otherwise it's a pennant.
Volume trend: Trends downward 72% to 75% of the time until the breakout.
Breakout: Can be in any direction but is upward 68% of the time.
Confirmation: The pattern confirms as a valid one when price closes outside one of the trendlines.