The previous two units were reversal patterns, one was the head and shoulders pattern and the other was the double top/bottom pattern. In this unit we are going to look at the Rising Wedge and Falling Wedge Patterns. These patterns are normally a continuation pattern, so basically, a trend continuing in the same direction as it was moving.
This pattern happens when the market makes lower lows and lower highs with a contracting range. When you find this pattern in an uptrend it is considered a bullish pattern. This is because the market becomes narrower indicating that the correction is running out of steam and the resumption of the uptrend is about to happen.
A rising wedge pattern is a pattern which forms when the market makes higher highs and higher lows with a contracting range. When you find this pattern in a downtrend it is considered a bearish pattern. This is because the market becomes narrower during the correction, indicating that is running out of steam. This pattern would normally indicate a resumption of the downtrend.
Okay so here are a number of examples. I think the first example is actually incorrect. I believe you’d class this one as a flag rather than a wedge. I will go into that in the next unit. But you will see in each case that price continues its bearish trend.