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OPEN-SOURCE SCRIPT

Wedge Breakout

By mertenes3
Updated
The Wedge Breakout indicator is designed to identify and signal potential breakouts from a wedge pattern, a common technical analysis formation. A wedge pattern typically forms when the price moves within converging trendlines, indicating a potential upcoming breakout either upwards (bullish) or downwards (bearish).

Identifying Pivot Points:
  • The indicator first calculates pivot points, which are significant highs and lows that define the wedge's upper and lower boundaries.
  • Pivot Lows: It identifies the lowest price points over a specified length (input_len), which serves as the lower boundary of the wedge.
  • Pivot Highs: Similarly, it identifies the highest price points over the same length, forming the upper boundary of the wedge.

Drawing Trendlines:
  • The pivot points are connected to form dashed trendlines that represent the upper and lower boundaries of the wedge.
  • The indicator uses the SimpleTrendlines library to manage and draw these trendlines dynamically:
  • Green Trendline: Indicates an upward slope (bullish).
  • Red Trendline: Indicates a downward slope (bearish).


Calculating the Breakout Conditions:
  • A breakout is confirmed when the price action fulfills two conditions:
  • The candle's high exceeds the upper trendline's highest point.
  • The candle's low drops below the lower trendline's lowest point.
  • This condition suggests that the price is squeezing within the wedge pattern and is about to break out.


Determining Breakout Direction:

  • The direction of the breakout is determined by the candle's closing position relative to its opening:
  • Bullish Breakout (Upward): When the candle closes above its opening price (close > open) after breaching both trendlines, it suggests a bullish breakout. This condition is marked with a green upward triangle .
  • Bearish Breakout (Downward): When the candle closes below its opening price (close < open) after breaching both trendlines, it suggests a bearish breakout. This condition is marked with a red downward triangle.

Visual Representation:
  • Green Triangle Up: Plotted below the bar to indicate a potential bullish breakout.
  • Red Triangle Down: Plotted above the bar to indicate a potential bearish breakout.

Used library:
Simple Trendlines
Release Notes
fixed intersection rule
Release Notes
fixed calculation by past intersections
Release Notes
improved direction mechanism with:
KAMA Cloud
Bands and ChannelsPivot points and levelsTrend Analysis

Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.

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mertenes3

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