![]() Wedges are an easy-to-understand chart pattern, and when they diverge from a prior pattern, there are favorable risk/reward trading potentials. The breakout direction from the wedge determines whether the price resumes the previous trend or moves in the same direction. What does a Wedge Pattern in Technical Analysis indicate?Ī wedge pattern is a popular trading chart pattern that indicates possible price direction changes or continuations. The benefits of using a wedge pattern in technical analysis include its ability to give traders a clear visual indication of a likely trend reversal, enabling them to initiate or exit positions at a suitable period. The height of the wedge pattern often plays an important role in placing the targets. They place stop-losses on the opposite side of the wedge. Traders wait for a breakout to occur above or below the wedge, to enter the trade. A rising or falling slant heading in the same direction defines this pattern. The wedge pattern has three common elements observed in each scenario: firstly, the trendlines that are converging towards each other secondly, the volume tends to decline as the price progresses through the pattern and finally, there is a breakout from one of the trend lines. The characteristic feature of the pattern is the narrowing price range between two trend lines that are converging towards each other, creating a wedge shape.Ī contracting price range paired with either an upward price trend (known as a rising wedge) or a downward price trend (known as a falling wedge) defines the pattern. The wedge pattern is frequently seen in traded assets like stocks, bonds, futures, etc. ![]() So yeah, I still feel that December seems right for the start of the actual bull run.A wedge pattern is a price pattern identified by converging trend lines on a price chart. Once this happens we will go up before retracing to retest the same level as break out as support and then start the bull run. I still believe it won't be until October/November when we finally break out of the long term downtrend line (black). ![]() Regardless of which scenario plays out we are still ultimately going lower, it’s just a matter of when! The good news is that once this happens we will then go higher as per the height of the pattern provided we have supporting volume (thus confirming our breakout).Īlthough our ideal paths are the green or orange arrows, at this point in time I am more biased towards the orange or red arrows as these days we seem to play patterns out right to the apex rather than exiting at our optimal points. ![]() Whereas the red arrows plays out even longer and takes us all the way to the bottom of the support zone at around 5450ish. The orange arrow scenario sees us fall deeper into the green support zone at around 5500ish. The green arrows launch us out of the bullish falling wedge after bouncing off the green support zone at around 5680. From there I have drawn three possible scenarios based on where and when we might break out of the falling wedge: I still believe the falling wedge reversal is the most likely scenario at play and these latest movements actually indicate a larger pattern size and hence higher breakout scenarios to the upside when based on the height of the pattern.Īs you can see we are now expected to go up to around 6200-6300 before retracing again. We actually fell through the bottom of the previous falling wedge I drew, so I have now recalculated based on the updated price movements. Ok, as per my last analysis I discussed the possibility of a falling wedge reversal pattern forming.
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