Big Idea: Rising wedges signify that a bearish reversal is coming, where falling wedges indicate a bullish reversal. Wedges occur when a series of lower highs and higher lows form over several trading periods and look something like a triangle formation. Here are some examples of bullish and bearish wedges.
Example
These images are roughly what a rising and falling wedge looks like. When price is no longer in a steady uptrend and is consolidating in higher lows and lower highs, this signifies a lower volume to the upside which means sellers are ready to step in. The falling wedge pattern shows the same thing: short selling volume is dying down and the buyers are ready to step in.
Key Takeaways
-Both rising and falling wedges can signify that either a bullish or bearish move is coming
-Wedges form higher lows and lower highs on a rising wedge
-They signify a decrease in volume and a shift in positions
