Volumes are then at their lowest point and decrease as the waves increase.

A third wave is then formed thereafter but prices fall less and less in contact with the resistance. A second wave of decline then occurs, but of a lesser magnitude, signalling an inadequacy of sellers. The highest point reached during the first correction on the falling wedge’s resistance line forms the resistance. Sellers are finding it increasingly difficult to bring the price under the resistance line. The convergence of the two lines in the same direction (a decrease in price magnitude) tells us that prices continue to fall with lower and lower movement magnitude. This implies that the rising wedge pattern is considered valid if the price touches the support line at least 3 times and the resistance line twice (or the support line at least twice and the resistance line 3 times).Ī rising wedge marks the exhaustion of the selling trend. NB: a line is said to be 'valid' if the price line touches the support or resistance at least 3 times. The upper line is the resistance line the lower line is the support line.Įach of these lines must have been touched at least twice to validate the pattern. It is formed by two converging bearish lines.Ī falling wedge is confirmed/valid if it has a good oscillation between the two falling straight lines. A falling wedge is a bullish chart pattern (said to be 'of reversal').

Falling wedges