#6 of 10 Chart Patterns Every Trader Needs to Know - Wedges
Wedges form as an asset’s price action tightens between two sloping trend lines. There are two types of the wedge: rising and falling.
Both rising and falling wedges may be reversal patterns, with rising wedges representing a bearish market and falling wedges being more typical of a bullish market.
Rising Wedge Pattern
A rising wedge is represented by a trend line caught between two upwardly slanted lines of support and resistance. In this case, the line of support is steeper than the resistance line. This pattern generally signals that an asset’s price will eventually decline more permanently – which is demonstrated when it breaks through the support level.
Falling Wedge Pattern
A falling wedge occurs between two downwardly sloping levels. In this case, the line of resistance is steeper than the support. A falling wedge is usually indicative that an asset’s price will rise and break through the level of resistance, as shown in the example below.
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