Rising Wedge Pattern : The rising wedge chart pattern is basically known as a bearish stock pattern that begins with a bottom and contracts trading range. The rising wedge pattern gets narrow and prices move higher. The rising edge pattern will indicate slowing momentum and precede a reversal to the downside. Traders will identify the potential selling opportunity.
Basically, it is characterized by a trend line caught between two upward diagonal price trend lines of support and resistance. They will move in a converging pattern. The upper line is the resistance line and the lower line is the support line. The falling wedges signal a bullish reversal in the prices of securities. The rising wedge pattern is formed by the stock consolidates between two converging lines. Here the support and resistance lines have to point in an upwards direction and the support line has to be steeper than the resistance line.
Identifying a Rising Wedge Chart Pattern
The rising wedge chart pattern hints towards the bearish market. So when the wedge aligns itself with the current trend the probability is on the side of a market reversal. If the rising wedge pattern is pointing against the trend the probability lies on the side of a continuation. The rising wedge pattern is toughed to funnel the price into a narrow range but it does not point.
Trading the Rising Wedge :
The ascending wedge is called a challenging chart pattern used for trading. It is important to wait for a stock breakout and make use of other technical analysis tools to confirm the signals.
The rising wedge is considered valid if it has a good oscillation between the two bullish lines. To validate the pattern each of the lines must touch at least twice. The line is valid if the price line touches the resistance at least 3 times. The patterns are useful in predicting general price trends. It will breakout towards a reversal more than two-thirds of the time.
Breakdown
At the time of breakdown, the target is reached quickly. Like other patterns, the confirmation must be shown before a trade that is taken as wedges. So the process doesn’t need confirmation. It will break and drop fast to their target. The targets are located at the beginning of the upper trend line where the trend line is connected.
Prior Trend
Here to qualify as a reversal pattern prior thing is a trend to reverse it. The time required to form a rising wedge is 3 to 6 months. They are marked as a long-term trend reversal. The current trend will contain a rising wedge at a time when the pattern forms an extended advance.
Upper Resistance Line
The pattern takes at least two reactions as high to form the upper resistance line as three. Then each reaction high should be higher than the previous high.
Lower Support Line:-
There are at least two reactions to form the lower support line. Here each reaction low should be higher than the previous low.
Contraction
The advances from the reaction lows become shorter and shorter which makes the rallies unconvincing. It creates an upper resistance line that fails to keep pace with the slope of the lower support line and indicates a supply overhang as prices increase.
Support Break
The bearish confirmation of the pattern does not come until the support line is broken in a convincing fashion. They will wait for a break of previous reaction low. So when support breaks the reaction rally test the newfound resistance level.
Volume
When the price rises and the wedge evolves the volume declines. So the expansion of volume on the support line breaks as they are taken as bearish confirmation.
Conclusion
Chart will signal a selling opportunity after an uptrend at an existing downtrend. As the price breaks below the bottom side, the entry is placed. Then find the resistance at the lower trend line. Then place a stop loss above the back of the wedge. We should make the profit target measured by taking the height of the back of the wedge. Then we can extend the distance from the entry. This pattern has a low risk/high reward ratio. The rising wedge pattern is used commonly among professional technical traders.
