Technical Analysis Price Patterns Part 6

Wedge Formations (Continued)

Rising Wedge Reversal Pattern

The rising wedge exists as a reversal pattern in a rising trend and as a continuation pattern in a falling trend.

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The duration of the wedge should be a minimum of 20 bars; with fewer than 20 bars, it is considered a pennant.

Breaking out of a rising wedge is generally a bearish signal (figure 4.68).

It is rare for the price to break to the upper side of the rising wedge, although it can happen.

Figure 4.68: Rising wedge reversal pattern.

Rising Wedge Continuation Pattern

A rising wedge continuation pattern in a falling trend is a price reaction to the down-move. 

The chance for a big profit is less for a rising wedge continuation pattern than for a rising wedge reversal pattern because part of the down-move is already history (figure 4.69).

Figure 4.69: Rising wedge continuation pattern.

Pay attention to the rare rising wedge after the bottom of a downtrend, as in figure 4.70.

Figure 4.70: Rising wedge after a bottom formation.

Here the rising wedge probably is the first reaction after a longer-term downtrend. The breakout to the lower side is most likely a temporary reaction against the new longer-term up-move.

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