JPY/USD – Rising Wedge Breakdown Leads to Bearish Trend Continuation
🔎 Market Context
On the 15-minute timeframe, JPY/USD displayed a classic transition from bullish strength into bearish pressure. The initial uptrend was strong and consistent, but technical signs of exhaustion soon became visible through chart patterns and structural shifts.
This setup highlights how combining pattern analysis, support/resistance zones, and price action provides a high-probability trading strategy.
🧱 Phase 1: Rising Wedge – The Warning Signal
A Rising Wedge pattern was the first key signal suggesting a potential reversal. This pattern is characterized by:
Higher highs and higher lows, but the highs are rising at a decreasing rate, showing bullish momentum fatigue.
Buyers are still in control, but their strength is waning with each push upward.
The wedge's narrowing shape indicates a potential volatility contraction before a breakout.
Once price breaks the lower wedge trendline, it signifies a shift in control from buyers to sellers.
📌 Key Takeaway:
The rising wedge often traps late buyers and invites aggressive sellers at the breakdown point, creating strong initial momentum in the opposite direction.
📊 Phase 2: Structure Shift – From Uptrend to Downtrend
After the wedge breakdown, we observe the first signs of bearish structure forming:
A sharp drop occurs right after the wedge breaks—this is the impulse leg.
Price finds temporary support at the 0.007060 – 0.007070 zone, but a clean bounce is missing.
Instead, price retests the broken wedge support (now resistance), fails to close above, and forms a lower high.
This shift is vital. It's not just about the pattern breaking but about what comes next—lower highs and lower lows confirm the emerging downtrend.
🧠 Phase 3: Bearish Setup Activation – Entry, SL, and TP
Now that price has broken structure and formed a lower high, we can look for short setups:
🔻 Entry Options:
Break-and-Retest Entry: Enter after the retest of the broken support turned resistance.
Continuation Entry: Enter after confirmation of the lower high and minor pullback.
🛡️ Stop-Loss (SL):
Placed above the resistance zone at 0.007135, which invalidates the bearish setup if broken.
This SL placement gives price room to move while staying outside the current structure.
🎯 Take-Profit (TP):
Marked at 0.007045, a level that aligns with:
Prior price reaction zones.
The measured move of the rising wedge.
Strong psychological and technical support.
This risk/reward ratio is favorable, offering clean trade management.
🌀 Price Behavior Forecast – Path Projection
The price is expected to:
Retest the broken support as resistance (already done).
Form a lower high below the resistance box.
Continue to produce lower highs and lower lows.
Ultimately reach the target of 0.007045, possibly followed by consolidation or reversal.
This forecasted price path gives traders a visual plan and reduces emotional decision-making.
🧩 Technical Confluences Supporting the Trade
Bearish Divergence (if visible on RSI/MACD) during the wedge top.
Trendline break of the wedge’s support.
Support zone flip to resistance, confirming bearish sentiment.
Clear market structure: First lower high and lower low are present.
Volume drop on bullish pullbacks (optional to observe).
🧠 Trading Psychology Behind the Setup
Retail traders often buy the highs during strong bullish moves, especially inside a rising wedge, expecting continued breakout.
Smart money waits for pattern failure and steps in at the retest.
The pattern traps retail buyers and triggers their stop-losses on the downside, accelerating momentum.
✅ Summary of the Bearish Setup
Parameter Details
Pattern Rising Wedge Breakdown
Bias Bearish
Entry Break + Retest or Lower High
Stop-Loss 0.007135 (above resistance)
Target 0.007045
RR Ratio 2:1 or better
Trend Bearish Continuation
🏁 Final Thoughts
This setup demonstrates how powerful price action, patterns, and structure-based trading can be when applied with discipline and proper risk management. The rising wedge was the precursor to the bearish shift, and the lower high confirmed the bias. With a well-defined SL and TP, this setup provides clarity and confidence to execute.
🔎 Market Context
On the 15-minute timeframe, JPY/USD displayed a classic transition from bullish strength into bearish pressure. The initial uptrend was strong and consistent, but technical signs of exhaustion soon became visible through chart patterns and structural shifts.
This setup highlights how combining pattern analysis, support/resistance zones, and price action provides a high-probability trading strategy.
🧱 Phase 1: Rising Wedge – The Warning Signal
A Rising Wedge pattern was the first key signal suggesting a potential reversal. This pattern is characterized by:
Higher highs and higher lows, but the highs are rising at a decreasing rate, showing bullish momentum fatigue.
Buyers are still in control, but their strength is waning with each push upward.
The wedge's narrowing shape indicates a potential volatility contraction before a breakout.
Once price breaks the lower wedge trendline, it signifies a shift in control from buyers to sellers.
📌 Key Takeaway:
The rising wedge often traps late buyers and invites aggressive sellers at the breakdown point, creating strong initial momentum in the opposite direction.
📊 Phase 2: Structure Shift – From Uptrend to Downtrend
After the wedge breakdown, we observe the first signs of bearish structure forming:
A sharp drop occurs right after the wedge breaks—this is the impulse leg.
Price finds temporary support at the 0.007060 – 0.007070 zone, but a clean bounce is missing.
Instead, price retests the broken wedge support (now resistance), fails to close above, and forms a lower high.
This shift is vital. It's not just about the pattern breaking but about what comes next—lower highs and lower lows confirm the emerging downtrend.
🧠 Phase 3: Bearish Setup Activation – Entry, SL, and TP
Now that price has broken structure and formed a lower high, we can look for short setups:
🔻 Entry Options:
Break-and-Retest Entry: Enter after the retest of the broken support turned resistance.
Continuation Entry: Enter after confirmation of the lower high and minor pullback.
🛡️ Stop-Loss (SL):
Placed above the resistance zone at 0.007135, which invalidates the bearish setup if broken.
This SL placement gives price room to move while staying outside the current structure.
🎯 Take-Profit (TP):
Marked at 0.007045, a level that aligns with:
Prior price reaction zones.
The measured move of the rising wedge.
Strong psychological and technical support.
This risk/reward ratio is favorable, offering clean trade management.
🌀 Price Behavior Forecast – Path Projection
The price is expected to:
Retest the broken support as resistance (already done).
Form a lower high below the resistance box.
Continue to produce lower highs and lower lows.
Ultimately reach the target of 0.007045, possibly followed by consolidation or reversal.
This forecasted price path gives traders a visual plan and reduces emotional decision-making.
🧩 Technical Confluences Supporting the Trade
Bearish Divergence (if visible on RSI/MACD) during the wedge top.
Trendline break of the wedge’s support.
Support zone flip to resistance, confirming bearish sentiment.
Clear market structure: First lower high and lower low are present.
Volume drop on bullish pullbacks (optional to observe).
🧠 Trading Psychology Behind the Setup
Retail traders often buy the highs during strong bullish moves, especially inside a rising wedge, expecting continued breakout.
Smart money waits for pattern failure and steps in at the retest.
The pattern traps retail buyers and triggers their stop-losses on the downside, accelerating momentum.
✅ Summary of the Bearish Setup
Parameter Details
Pattern Rising Wedge Breakdown
Bias Bearish
Entry Break + Retest or Lower High
Stop-Loss 0.007135 (above resistance)
Target 0.007045
RR Ratio 2:1 or better
Trend Bearish Continuation
🏁 Final Thoughts
This setup demonstrates how powerful price action, patterns, and structure-based trading can be when applied with discipline and proper risk management. The rising wedge was the precursor to the bearish shift, and the lower high confirmed the bias. With a well-defined SL and TP, this setup provides clarity and confidence to execute.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.