![]() ![]() In addition, we may already have a double bearish divergence, which is an additional strong reversal signal. This gives us the right to assume that we are dealing with a wedge. 3 points on the upper trend line and 2 on the lower one. Thus, we get 5 points of contact, which alternate with each other. After the second rollback, the price moves up again, forming a new high.We have 4 touch points and we can assume that we are dealing with a Wedge pattern. Then a rollback follows again, and we can already draw two converging trend lines.In this case, most likely we will see divergence on the RSI or MACD indicators. Then the trend resumes and makes a high above the previous high.After that, a minor correction occurs, which we will designate as the second wave. ![]() First, we have a trend, then we will take any bullish movement as the beginning of the wedge pattern.Let’s follow the formation of Wedge pattern step by step (on a bullish trend, for example): So, converging trend lines in one direction is the main distinctive feature of rising wedge or falling wedge patterns. A horizontal upper or lower trend line indicates a horizontal triangle. Both lines should slope up or down and there should be no near-horizontal trend lines. ![]() The key point is that trend lines narrow as the pattern forms and sooner or later will cross if continued. That is, if you add a flagpole to the Wedge figure, you get nothing more than a Pennant. Unlike a Pennant, a Wedge does not have a so-called flagpole. Unlike a Triangle, a Wedge pattern has the direction of both trend lines in the same direction (either both lines are directed up, or both – down). Therefore, before trading wedge, it is recommended that you first simply observe the formation process itself, make an assumption and only then see how correct it was. This is a complex pattern often associated with the Elliott Wave Theory. This include a wedge pattern, which can have completely different meanings and often its development depends on where it was formed. Some templates seem familiar, but at the same time, there is confusion in their application, since not everything is always unambiguous, especially in the market. It’s no secret that the more a pattern matches the rules of its formation and the more it fits the description, the better its realization will be. However, today we will talk about wedges – patterns that traders argue about. They are quite common and easily recognizable, therefore, they are the most attractive for trading. Some are fairly easy to spot and trade, such as a head and shoulders or a triangle. The modern trader has a wide variety of chart patterns in his arsenal.
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