Alternatively, the highest peak in a Falling Wedge or the lowest valley or trough in a Rising Wedge can be used as a more conservative price objective. Price ProjectionĪ price projection of the Wedge pattern can be calculated by taking the widest part of the Wedge and adding it to the breakout point in a Falling Wedge, or subtracting it from the breakout point in a Rising Wedge. More aggressive traders attempt to enter when the price rebounds from the lower support trendline in a Falling Wedge or the upper resistance trendline in a Rising Wedge. The breakout should be accompanied by an increase in volume. In a Falling Wedge, the price should break out to the upside and in a Rising Wedge the price should break out to the bottom. Entry SignalĪn entry signal is given when the price breaks out of the Wedge. However, the breakout from the Rising Wedge will occur when the price breaks below the lower support trendline. As with the Falling Wedge, the Rising Wedge pattern should have at least two test of both the upper resistance trendline and the lower support trendline. This indicates that buying pressure is drying up as buyers are not able to push the price up as effectively as they had done before. The two trendlines that contain the Rising Wedge formation will have an upward slope with the lower support trendline having a more acute, or a steeper, slope than the upper resistance trendline. It is a bearish pattern with the price action in the Rising Wedge being bullish. The Rising Wedge PatternĪ Bearish Rising Wedge with its price objectiveĪ Rising Wedge is the opposite of a Falling Wedge. The breakout from the Falling Wedge occurs when the price breaks above the upper trendline that was forming a resistance line. The pattern should have at least two test of both the upper resistance trendline and the lower support trendline.

This indicates that selling pressure is drying up as sellers are not able to push the price down as effectively as before. The Falling Wedge is bound by two trendlines that have a downward slope with the upper trendline (the resistance line) having a more acute slope, or a steeper slope, than the lower trendline (the support line). The Falling Wedge PatternĪ Falling Wedge is a bullish pattern though the price action in the wedge itself would be bearish. In Elliot Wave theory, however, the wedge must be in the direction of the preceding trend, the motive wave, and cannot be corrective or reactionary. Wedge patterns are also part of the Elliott Wave Principle where they are seen as diagonal triangles. Volume is an important characteristic of a Wedge and should decrease during the formation of the Wedge and increase on the breakout. At least five pivot points (peaks or valleys) are required to form a wedge, with three pivots on the one trendline and two on the other. They, unlike the symmetrical triangle, are slanted either to the upside, making it a Rising Wedge, or to the downside, making it a Falling Wedge. The Wedge pattern is similar to the symmetrical triangle as they too have converging trend lines that meet at an apex.

The pattern itself does not mark the reversal of the preceding trend the breakout from the pattern marks the reversal of the trend formed within the Wedge pattern. Similarly, a Falling Wedge is often preceded by an uptrend but it can also be found in a downtrend. It is important to note that while the Rising Wedge is often preceded by a downtrend, it can also be found in an uptrend. In either case, the breakout is often in the opposite direction of the trend that forms in the wedge itself.

The Wedge formations are reversal patterns that can appear bullish, in the case of a Rising Wedge, or bearish, in the case of a Falling Wedge.

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