How to Trade a Falling Wedge
by Kamil Schumann
A Falling Wedge looks like an elongated triangle that slopes downwards with the price spiralling lower between two converging trendlines. It is usually found in uptrends as a continuation pattern that slopes agains the prevailing trend. Sometimes, the falling wedge may materialize at the end of a prolonged downtrend where it can act as a reversal pattern. Volume decreases during the formation of the wedge and should expand on the breakout.
Profit Target - can be measured by adding the width at the top of the pattern to the point of breakout.
Example - This weekly chart of CRDN shows a Falling Wedge in an uptrend.
Trading Tip - A Falling Wedge may be traded as a reversal pattern but leads to much better trades as a continuation pattern that forms on a decrease in volume in well established uptrends where it can mark the halfway point of a major move.
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