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A rising wedge is a bearish chart pattern used in technical analysis. It is formed when the price of an asset is making higher highs and higher lows, but the highs and lows are converging towards each other, creating a wedge-like shape that slopes upward. Here are the key characteristics and implications of a rising wedge:
Shape: The pattern is bounded by two trendlines – an upward sloping resistance line connecting higher highs and an upward sloping support line connecting higher lows. These lines converge over time.
Volume: Often, volume decreases as the pattern progresses. This declining volume can indicate weakening momentum behind the price movement.
Breakout: The rising wedge is typically considered a bearish reversal pattern, which means that the price is expected to break down below the support line. When this breakout happens, it is usually accompanied by an increase in volume, confirming the pattern.
Trend: A rising wedge can form after an uptrend or a downtrend. When it forms after an uptrend, it signals a potential reversal to the downside. When it forms after a downtrend, it might indicate a continuation of the downtrend.
