Rising Wedge Chart Pattern

A rising wedge is a bearish pattern that appears initially as an uptrend. However, the wedge forms as the lows of the shape continue to go higher. The top of the pattern does the same – essentially looking very bullish at first glance. However, the overall range from lows to highs constricts, and this means that the inertia is growing. The tightening range builds up the inertia, and then we eventually break down. You can see the overall pattern itself on the graphic just below:

Rising Wedge formation

Rising Wedge formation

The pattern isn’t necessarily a confirmed rising wedge until we break below the uptrend line of the lows. This means that the trader is best off waiting for that breakdown. The market breaking below that line shows that the sellers are taking control, as the buyers are suddenly finding themselves on the back foot. Not to mention that they are starting to lose money. Because of this, the buyers will have to sell their positions in order to close out the trades that are now in trouble. This becomes a self-feeding phenomenon, and the market continues to sell off.

Another feature of the rising wedge is that it has a target built in. The sellers should target the very low of the wedge itself. In other words, where the pattern started. As you can see on the chart below, this is exactly what happened, as the rising wedge being broken to the downside lead the charge lower and to the target. (And slightly below.)

Rising Wedge in action.

Rising Wedge in action.

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