A The Rising Wedge is a chart pattern formed by drawing two ascending trend lines, one representing a high and one representing a low.
The upper trendline also moves to the upper right, and its slope is smaller than the lower trendline.
A rising wedge usually has at least five reversals: 3 reversals for one trendline and 2 for the opposite trendline.
It is classified as Bearish Reversal chart pattern.
The slope of the trend line
representing the highs is lower than the slope of the trend line representing the lows, indicating that the lows are growing faster than the highs.
The final shape forms a gradually narrowing wedge, hence the name of this chart pattern.
Because the trendline describing the rising wedge is rising, the rising wedge is sometimes mistakenly viewed as a continuation pattern of the overall uptrend.
The seemingly upward trend in price invites bullish traders to continue buying, while bearish traders continue to sell off their holdings, maintaining a strong upper resistance line.
As the price refuses to break through the upper resistance level, the buying pressure gradually decreases, the lower support level is broken, and the price breaks downward, starting a strong downward trend.
A rising wedge should be considered a strong sell signal and indicates that the trend is about to reverse.
A rising wedge is the opposite of a falling wedge.
When following a downtrend, a rising wedge shows a weak rebound that, in most cases, eventually breaks above the lower line, continuing the previous trend.
In a falling wedge, upward breakouts are less common, but they do occur and are more likely than downward breakouts.
Be careful when a rising wedge accompanies an uptrend: its versatility can make it a reversal pattern rather than the usual continuation pattern.
A breakout is usually expected to occur in the second half of the pattern, near the middle. Volume is most likely to drop as this pattern develops
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