The break out point (exit) generally occurs at 60% of the length of the falling wedge. Pullbacks are detrimental to the pattern’s performance. Retracements are generally twice as fast as the falling wedge was in its formation Exploiting a false bullish break is therefore statistically low risk. If a false bullish break occurs, the exit will be downwards in only 3% of cases. False breaks (or false exits) give an indication of the direction of exit. The steeper the falling wedge’s trend lines (falling strongly), the more severe the upward movement is at the breakout (exit from the chart pattern). The contact points on the falling lines must be significant because otherwise it might be a flag. In 27% of cases, false breaks (false exits) appear. In 53% of cases, the price makes a support pullback on the falling wedge’s resistance line. In 63% of cases, the pattern’s price objective is achieved when the resistance line is broken. In 55% of cases, a falling wedge is a reversal pattern. Graphical representation of a falling wedge Falling wedge statistics NB: it is often observed that the steeper the falling wedge’s trend lines, the faster the price objective is reached. The price objective is determined by the highest point that caused the wedge to form. This break out is generally accompanied by high volumes. The movement then has almost no selling force, which brings about a bullish reversal.Ī break of the resistance line definitively validates the pattern. 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. Continuation patterns manifest as an interruption of the larger trend. In circumstances like this, the market is mature for a reversal. 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. If the volume is falling as the wedge pattern advances, then this indicates bullish whales are no longer supporting the price.

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').

What does a falling wedge indicate