This pattern is often referred to as a megaphone pattern due to its shape, featuring two lines – one ascending and one descending – that diverge from each other. Measure the height of the pattern (in its widest side) in terms of pips, and then subtract/sum the same amount of pips from the eventual break out level.The broadening wedge pattern is a chart pattern recognized in technical analysis, used by traders and analysts to predict the potential future price movements within a specific financial market. The pattern is not complete until the market breaks the resistance trendline. This falling wedge is a reversal pattern because the slope (downward) of the wedge is in the same direction of the trend (downtrend). In this case the market was trending up and the slope of the wedge is upward. The slope of the wedge is in direction of the trend. What makes this wedge a reversal pattern? This pattern is completed when the price breaks through the resistance trendline. Two or more touched points are required to form the converging trendlines. The highs and the lows of the pattern form a falling wedge. It starts out wide, but narrows as prices keep going down. Reversal falling wedges are a bullish reversal pattern. The market movement after a wedge or any reversal pattern could produce: a trend reversal, the beginning of a retracement or a consolidation period. Notice the reversal rising wedge here forecasts a retracement, not a trend reversal. The pattern is completed when the market breaks the support-trendline. This rising wedge is a reversal pattern because the slope (upward) of the wedge is in the same direction of the trend (uptrend). The pattern is completed when the price breaks the support trendline. Starts out wide, and narrows as the market reaches new highs forming a rising wedge when two or more points are connected. Reversal rising wedges are a bearish reversal pattern found at the end of the uptrend. This pattern begins wide and contracts as the market keeps rising: When the market broke the support trendline and the pattern got completed, it led to further gains. This falling wedge is a continuation pattern because the slope (downward) of the wedge is against the direction of the trend (uptrend). The slope of the wedge is against the previous trend. What makes this wedge a continuation pattern? Continuation Falling WedgeĬontinuation falling wedges are a bullish continuation pattern. When the pattern got completed (support trendline got broken), led to further downside movements. This rising wedge is a continuation pattern because the slope (upward) of the wedge is against the trend (downtrend). This pattern is completed when the price breaks through the support trendline. It starts out wide, but narrows as prices keep going up. Continuation Rising WedgeĪs all wedges, this one begins wide and contracts as the market reaches new highs:Ĭontinuation rising wedges are a bearish continuation pattern. Depending on where the pattern was formed and its slope it could signal a continuation of the trend or a trend reversal. The reason is simple, these patterns can be either reversal or continuation patterns. You may wonder why is it that we have the falling and rising wedge in a separate section.
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