For example, you could want to wait for several daily closes below trend to confirm the trend reversal. This means waiting for confirmation that the prior trendline now acts as resistance. Some traders wait for an unsuccessful retest of the trendline before opening a short position. The breakout need not happen on rising volumes, but an expansion would provide a bearish confirmation. This pattern is complete once price breaks convincingly below the trendline. Look for falling trading volumes as the pattern builds, as evidence that buying interest is waning. Support and resistance lines converge towards one another, as the distance between highs and lows becomes noticeably tighter.They should touch support on at least two occasions, and ideally more. Prices should also make higher lows, bounded by a lower support line, also called the pattern’s trendline.They should touch resistance on at least two occasions, and ideally more. Prices should make higher highs, bounded by an upper resistance line. In a rising wedge pattern, prices move between upward sloping converging support and resistance lines. Rising wedge durationĪ rising wedge pattern usually forms over 3 to 6 months. Credit Suisse Group (CS) Rising Wedge stocksĭownload our free chart patterns PDF for a guide to 20 classical chart patterns with over 100 interactive charts, also on.General Electric (GE) Rising Wedge stocks.It suggests that the current uptrend could end, even as prices make higher highs. The rising wedge pattern is a bearish pattern, whether it forms after an established uptrend or during a downtrend, so the next time you spot this pattern on your favorite market exercise caution if you are holding a long position or prepare for an opportunity to get short.A rising wedge, also known as a bearish wedge, is indicative of slowing momentum in an uptrend. A target could again have been placed at the level where the rising wedge started from with a stop loss above the last higher high.Īlways make sure that your potential reward is larger than the risk you are taking on and if your stop loss ends up being too far away, then consider placing your stop above a previous swing high that was formed on the way down, before the support line was broken. This is also a picture-perfect example where price pulled back to the support line, retested it from below and dropped lower. My final chart shows that same multi-year rising wedge that formed in AUD/USD but note that although price made higher highs that the momentum between each peak started slowing down, which is a behavior that these patterns tend to display. Traders Tip: When you are following a rising wedge in real-time, it can be a good idea to watch for momentum divergence on a MACD-Histogram between the higher highs, and use it as an additional confirmation method that a rising wedge might be nearing an end. The ideal place to set a target will be at the lower level where the rising wedge started from, with a stop loss a few pips above the final high before the breakout occurred. Just keep in mind though, that this may not always happen and result in a trader missing an entry. Conservative traders, on the other hand, will generally wait for price to retest the lower support line from below before they will execute a short trade. Since the rising wedge is a bearish pattern, aggressive traders will typically wait for price to break below the lower support line before they will execute a short position. Practice This Strategy How to Trade the Rising Wedge Pattern
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