#Falling wedge setup series

The breakout is the point at which the price of a security breaks above the resistance trendline of the falling wedge pattern.Īn increase in volume upon breakout is considered to be a confirmation of the validity of the pattern and the strength of the move. When analyzing volume in relation to a falling wedge pattern, it is important to look for an increase in volume upon the breakout. Understanding the Importance of Analyzing Volume Upon Breakout This increase in volume confirms the strength of the trend and increases the chances of success for the trade. A strong increase in volume as the stock approaches the support level can indicate that buyers are becoming more aggressive and that a reversal is likely to occur. This decrease in volume suggests that the selling pressure may be subsiding and that buyers may be starting to take control of the stock.Īs the stock approaches a potential reversal, traders should look for an increase in volume.

This decrease in volume suggests that the stock has reached a state of indecision, as buyers and sellers are in balance and the stock is consolidating.Īs the falling wedge pattern forms, traders should be on the lookout for a decrease in trading volume, as the stock continues to consolidate in the tight trading range. In both scenarios, as the stock then reaches support and begins to consolidate, volume will typically decrease, forming a tight trading range. In a continuation pattern, the initial advance should also have high volume, indicating the legitimacy of the uptrend. In a bottoming pattern, the initial downtrend should have high volume, indicating strong selling pressure and a bearish sentiment among traders and investors. When identifying a falling wedge pattern, volume characteristics can provide valuable information about the strength of the trend and the potential for a reversal. The Importance of Volume Analysis in Identifying Falling Wedge Patterns Also, it’s important to consider the context of the market and other indicators before making a decision based on a falling wedge pattern. It’s important to note that a falling wedge pattern within an uptrend is a bullish continuation pattern, which means it signals a potential continuation of the current trend and not a reversal. This move indicates that the bulls are still pushing the price higher and the uptrend is likely to continue. The pattern is typically confirmed when the price breaks above the resistance trendline of the wedge. The bulls are still in control and pushing the price higher. In this scenario, the falling wedge pattern suggests that the uptrend is likely to continue. The Falling Wedge as a Continuation PatternĪ falling wedge as a bullish continuation pattern within an uptrend can be observed when the price of a security is trending upward and forming a falling wedge pattern. It’s important to note that a falling wedge pattern at the end of a downtrend is a bullish bottoming pattern, which means it signals a potential change in the direction of the trend and the start of an uptrend. This move indicates that the bears have lost control, and the bulls have taken over, pushing the price upward and reversing the downtrend.

In this scenario, the falling wedge pattern suggests that the downtrend is likely to end, and the bulls are starting to take control of the market.

The price breaks out of the wedge, indicating a reversal of the downtrend and the potential for an upward price movement.Ī falling wedge as a bullish bottoming pattern that ends a downtrend can be observed when the price of a security is trending downward and forming a falling wedge pattern.

The downward slope becomes increasingly narrow over time, forming a wedge shape.

The price begins to trend downward, forming a downward slope.

To identify a falling wedge pattern, you will want to look for the following characteristics: The falling wedge pattern is considered bullish as it suggests that buying pressure is increasing and the price may break out of the wedge to the upside. As the trendlines converge, the distance between them decreases, narrowing the wedge over time.

#Falling wedge setup series

The pattern is characterized by two converging trendlines, with the upper trendline connecting a series of lower highs and the lower trendline connecting a series of lower lows. A falling wedge chart pattern in technical analysis can indicate a bullish reversal that can occur as a bottoming pattern or a continuation pattern.