In technical analysis, a rising wedge is a negative chart pattern that is formed when two trend lines meet in the middle. The lines of trend eventually ascend to converge upon one another.
The first trend line draws a connection between the most recent higher lows and lower highs, while the second trend line draws a connection between the most recent lows.
The resulting form resembles a triangle with an acute angle at one of its sides. A falling wedge is the pattern that results from a rising wedge.
Because the low is higher than the high and the lower trend line is steeper than the upper one, the pattern of a rising wedge could be interpreted as a bearish wedge.
The only elements that differentiate the falling wedges from one another, despite the fact that they have a similar shape, are the angle at which the triangle is positioned and what the pattern represents.
The rising wedge (ascending) pattern is considered to be a bearish pattern since it indicates that prices will continue to fall in the future or that there will be a breakout to a downward trend. The trade volume drops as the wedge develops.
Decreases in trade volume may signal that sellers are consolidating their position in preparation for a bearish breakout, despite the fact that the wedge is correctly capturing the price movement, which is continuing to move higher.
The falling wedge (descending) pattern, on the other hand, has a negative slope, which means that it slants downhill.
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It also forecasts a nearby rebound, which is why it is considered a bullish pattern. The intriguing aspect is that a rising wedge can show up as a continuation pattern during a downtrend or as a reversal pattern during an uptrend.
How Do Rising Wedges Appear?
The rising wedge pattern has the form of a slice of pizza whenever it is formed by the intersection of two trend lines. The rising wedge pattern is characterized by a succession of highs that are higher and lows that are lower.
The pattern's extreme high points have to be covered by the trend line representing resistance. To break through the resistance line, there must be at least two higher highs.
In a similar manner, draw a support trend line that extends from higher to lower price points. You'll need at least two swing lows to construct the trend line that will act as support for the price.
After drawing the trend lines of resistance and support, you should see a triangular structure that looks like a wedge.
In order to correctly draw the rising wedge pattern, the triangle's apex needs to point in an upward direction.
As a consequence of this, the resistance trend line needs to have an upward slope in order for this to be considered a rising wedge pattern.
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