FALLING WEDGE PRICE ACTION
This chart pattern can be formed after either an uptrend or a downtrend. Bears make the first move by creating a resistance and pushing the exchange rate downwards. As bulls try to fight back, it looks like the bears have the upper hand as lower highs and lower lows are being formed. However, bulls suddenly start an uptrend by breaking the wedge's upper border resistance that was created by the bears.
Let's break down the pattern formation!
Price action finds the first resistance (1), which will be the highest high in the pattern.
Price action reverses direction from the first resistance (1) and goes downwards till it finds the first support (2), which will be the highest low in the pattern.
Price action reverses direction from the first support (2) and goes upwards, till it finds the second resistance (3), which must be lower than the first resistance (1)
Price action reverses direction from the second resistance (3) and goes downwards, till it finds the second support (4), which must be lower than the first support (2)
The pattern is completed when price action reverses direction from the second support (4) and goes upwards till it breaks the wedge's upper border at point (5)
Entry: after breaking the wedge's upper border at point (5), either with an entry after the breakout, or after a possible retest of the upper border's breakout rate.
Take profit: identified by measuring the vertical distance between the first resistance (1) and the first support (2), that measurement is then applied from the breakout rate (5)
Stop loss: can either be the breakout rate (5), or the last touch to the wedge's lower border (4) before the breakout
This chart pattern can be formed after either an uptrend or a downtrend. Bears make the first move by creating a resistance and pushing the exchange rate downwards. As bulls try to fight back, it looks like the bears have the upper hand as lower highs and lower lows are being formed. However, bulls suddenly start an uptrend by breaking the wedge's upper border resistance that was created by the bears.
Let's break down the pattern formation!
Price action finds the first resistance (1), which will be the highest high in the pattern.
Price action reverses direction from the first resistance (1) and goes downwards till it finds the first support (2), which will be the highest low in the pattern.
Price action reverses direction from the first support (2) and goes upwards, till it finds the second resistance (3), which must be lower than the first resistance (1)
Price action reverses direction from the second resistance (3) and goes downwards, till it finds the second support (4), which must be lower than the first support (2)
The pattern is completed when price action reverses direction from the second support (4) and goes upwards till it breaks the wedge's upper border at point (5)
Entry: after breaking the wedge's upper border at point (5), either with an entry after the breakout, or after a possible retest of the upper border's breakout rate.
Take profit: identified by measuring the vertical distance between the first resistance (1) and the first support (2), that measurement is then applied from the breakout rate (5)
Stop loss: can either be the breakout rate (5), or the last touch to the wedge's lower border (4) before the breakout