What it looks like
A rising line through the higher lows and a rising line through the higher highs. The line of lows is steeper, so the lines converge. New highs come, but each is only a little higher. The pattern completes on a close below the line of lows. The start of the wedge is its first, lowest point.
What it means
Price was still rising, but each push achieved less than the one before. Buyers were running out of energy while sellers met each rise a little sooner. When price closes below the line of lows, that fading rise has ended in a break the other way.
How to trade it
- 1
Draw the steeper line of lows and the flatter line of highs.
- 2
Confirmation: a candle closes below the line of lows.
- 3
Entry: sell at that close.
- 4
Stop: above the end (the latest high) of the wedge. Example on US30: wedge begins at 46,700, latest high 47,250, close below the line at 47,150. Sell at 47,150, stop at 47,270, a 120 point risk.
- 5
Target: where the wedge began, about 46,700.
A close back inside the wedge.
Where it works best
After an extended rise into resistance on 1 hour to daily charts, or as a bounce inside a bigger downtrend.
WickSpeak finds rising wedge breakdowns automatically and labels them on the candles that made them. Each note says what it is, how to trade it and that a close back inside the wedge proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Confusing it with a rising channel, where the lines are parallel.
- Selling before the line of lows breaks.
- Shorting a strong uptrend on a wedge with only a couple of touches.
Related patterns
Questions traders ask
Is a rising wedge bearish?
Usually. Price is rising but each push achieves less, and the break below the line of lows is a bearish signal.
What is the rising wedge target?
A common target is where the wedge began, its first low.
Where is the stop?
Above the end of the wedge, the latest high. A close back inside the wedge already proves the breakdown wrong.
Can a rising wedge break upwards?
It can, and then the bearish case is cancelled. That is why the trade waits for a close below the line of lows.