Wedge Pattern
A wedge is a chart pattern where price moves between two converging trendlines that both slope in the same direction. Rising wedges are bearish; falling wedges are bullish.
Understanding the Concept
Wedges are powerful reversal patterns. A rising wedge during an uptrend signals weakening momentum—buyers are losing steam even as price climbs. A falling wedge during a downtrend shows sellers exhausting. The pattern resolves when price breaks the opposite direction of the wedge slope. Volume typically diminishes during formation and spikes on breakout. These patterns take time to form (weeks to months), which makes them reliable. Quick wedges on lower timeframes are less trustworthy.
Real-World Example
Bitcoin forms a rising wedge over three weeks, making higher highs and higher lows but both trendlines slope upward. When BTC breaks below the lower trendline with volume, it signals the rally is over—traders go short or exit longs.
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