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What is a wedge pattern?

Wedge patterns are usually characterized by converging trend lines over 10 to 50 trading periods. The patterns may be considered rising or falling wedges depending on their direction. These patterns have an unusually good track record for forecasting price reversals. A wedge pattern can signal either bullish or bearish price reversals.

What is the difference between a rising wedge and a falling wedge?

A Falling Wedge is a bullish chart pattern that takes place in an upward trend, and the lines slope down. A Rising Wedge is a bearish chart pattern that’s found in a downward trend, and the lines slope up. Wedges can serve as either continuation or reversal patterns.

What is a reversal wedge pattern?

The two forms of the wedge pattern are a rising wedge (which signals a bearish reversal) or a falling wedge (which signals a bullish reversal). This usually occurs when a security’s price has been rising over time, but it can also occur in the midst of a downward trend as well.

Can a wedge pattern break a trend line?

While price can be out of either trend line, wedge patterns have a tendency to break in the opposite direction from the trend lines. Therefore, rising wedge patterns indicate the more likely potential of falling prices after a breakout of the lower trend line.

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