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Falling Wedge Prior Trend: To qualify as a reversal pattern, there must be a prior trend to reverse. Ideally, the falling wedge will form after an extended downtrend and mark the final low. The pattern usually forms over a 3-6 month period and the preceding downtrend should be at least 3 months old. Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be lower than the previous highs. Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be lower than the previous lows. Contraction: The upper resistance line and lower support line converge to form a cone as the pattern matures. The reaction lows still penetrate the previous lows, but this penetration becomes shallower. Shallower lows indicate a decrease in selling pressure and create a lower support line with less negative slope than the upper resistance line. Resistance Break: Bullish confirmation of the pattern does not come until the resistance line is broken in convincing fashion. It is sometimes prudent to wait for a break above the previous reaction high for further confirmation. Once resistance is broken, there can sometimes be a correction to test the newfound support level. Volume: While volume is not particularly important on rising wedges, it is an essential ingredient to confirm a falling wedge breakout. Without an expansion of volume, the breakout will lack conviction and be vulnerable to failure.
Education
by Berzerk_invest
5
Falling WedgeJust like the rising wedge, the falling wedge can either be a reversal or continuation signal. As a reversal signal, it is formed at a bottom of a downtrend, indicating that an uptrend would come next. As a continuation signal, it is formed during an uptrend, implying that the upward price action would resume. Unlike the rising wedge, the falling wedge is a bullish chart pattern. In this example, the falling wedge may be predicted as a reversal signal after breaking resistance zone. After a downtrend, the price made lower highs and lower lows. Notice how the falling trend line connecting the highs is steeper than the trend line connecting the lows.
HITBTC:CRDTUSDEducation
by Berzerk_invest
4
Inverted HammerWhat Is the Inverted Hammer Candlestick? The Inverted Hammer candlestick formation occurs mainly at the bottom of downtrends and can act as a warning of a potential bullish reversal pattern. What happens on the next candle after the Inverted Hammer pattern is what gives traders an idea as to whether or not prices will go higher or lower. What Does the Inverted Hammer Look Like? The Inverted Hammer formation is created when the open, low, and close are roughly the same price. Also, there is a long upper shadow which should be at least twice the length of the real body. What Does the Inverted Hammer Mean? On this chart of CRDT/USD you make see that there is a double confirmation of price reversing. To some traders, this confirmation candle, plus the fact that the downward trendline resistance was broken, gave them a potential signal to go long. It is important to note that the Inverted pattern is a warning of potential price change, not a signal, by itself, to buy. Follow the chart and always remember to follow your trading strategy.
HITBTC:CRDTUSDEducation
by Berzerk_invest