The rising wedge is a bearish chart pattern (known as a “reversal pattern”). It is formed by two converging bullish lines.
This is confirmed / valid if it has good oscillation between the two ascending lines. The upper line is resistance line and the lower line is support line.
The ascending wedge is considered valid if the price touches at least 3 times the support line and 2 times the resistance line (or at least 2 times the support line and 3 times the resistance line).
An ascending wedge marks the breathlessness of buyers. The convergence of the two lines in the same direction (decrease in the amplitude of the prices) informs us that the prices continue to increase with movements of amplitude less and less high. Buyers are finding it increasingly difficult to bounce price back on support. The lowest reached during the first correction on the support of the rising wedge will form the support. A second wave of increases will then occur, but of lesser amplitude, signaling the weakness of buyers. A third wave is formed thereafter but the prices will increase less and less on contact with the support. Volumes are then at their lowest and decrease with the waves. The movement then has almost no buying force which induces the desire for a bearish reversal.
The break of the support line definitively validates the figure. This break is generally accompanied by high volumes. The price target is determined by the lowest point that caused the wedge to form.
Notes and Statistics: #
- The steeper the trend lines of the rising wedge (strongly ascending), the more violent the downward movement will be at the breakout.
- False breaks give an indication when in the direction of exit. In only 3% of cases, if a false bearish breakout occurs, the exit will be from the top. Exploiting a false bearish breakout is therefore statistically low risk.
- The retracement is generally 2 times faster than the time of formation of the rising wedge.
- Pullbacks are detrimental to the performance of the figure.
- The break point generally occurs at 60% of the length of the rising wedge.
- Very wide rising wedge give better performance than narrow ones.
- 82% of cases, the exit is bearish.
- 55% of cases, this is a reversal figure.
- 63% of cases, the goal of the figure is achieved when the support line is broken.
- 53% of cases, the price carries out a pullback in resistance on the support line.
- 27% of cases, false breaks appear.