The falling wedge signals a bullish reversal pattern in price. It holds three common characteristics that traders should look for: First, it has converging trendlines. Next, a pattern has declining volume as the trendline progress. Finally, it’ll be preceded by a breakout through the upper trendline. What all these things come together, you have a falling wedge pattern, and a breakout to the upside should be anticipated.
The falling wedge pattern, as well as rising wedge patterns, converge to the smaller price channel. This means that the distance between where a trader would enter the trade and the price where they would open a stop loss order is relatively tight. Here it can be relatively easy to get kicked out of the trade for minimum loss, but if the stock moves to the trader’s benefit, it can result in an excellent return.
Attributes Pattern type: Reversal and continuation pattern Indication: Bullish Breakout confirmation: The confirmation for this pattern is a close above the upper trendline drawn across the highs with above-average volume. Measuring: the project target price for the falling wedge pattern is the highest high at the beginning of the formation. Volume: The volume tends to decline during the formation and increase on the breakout.
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