Rising Wedge

A narrowing upward pattern where price forms higher highs and higher lows, but the range contracts before breaking downward. This pattern signals that buyers are losing momentum, and a breakdown confirms a bearish trend.

Significance

• Suggests that buying pressure is weakening, despite the uptrend.
• Often leads to a sharp price decline once support breaks.
• A breakout to the downside confirms the trend reversal.

Characteristics

• Higher highs and higher lows, forming a contracting wedge.
• Breakout usually occurs downward when sellers take control.
• Volume declines during formation but rises significantly on breakdown.

Market Condition

• Found within an uptrend, signaling that the bullish momentum is slowing.
• More effective when supported by indicators like RSI divergence.

Trading Strategy

• Entry point – Short when price breaks below wedge support with volume.
• Stop-loss – Above the last swing high to reduce risk.
• Target price – Measure the wedge height and subtract it from the breakdown level.