A wedge is two trendlines converging, both pointing the same way.
Higher highs that run out of steam
Selling pressure fading
Rising wedge (bearish)
Higher highs and higher lows, but the highs rise slower than the lows. The trend is tiring. A break of the lower line often brings a sharp drop.
Falling wedge (bullish)
Lower highs and lower lows, but sellers are losing steam. A break above the upper line often brings a rally.
Wick says
A rising wedge is a staircase that gets narrower at the top. At some point, there's nowhere left to step.
Key takeaways
- Rising wedge = usually bearish; falling wedge = usually bullish.
- Trade the break of the wedge line.
- Target = the widest part of the wedge.