A falling wedge pattern is characterized by two converging trend lines that slope downwards, with the price moving between these lines.
Features:
Shape: The pattern is formed by two downward-sloping trend lines. The upper trend line connects the highs, and the lower trend line connects the lows of the price action. These lines converge, forming a wedge.
Volume: During the formation of the falling wedge, trading volume typically decreases. This indicates a consolidation phase.
Duration: The falling wedge can develop over various time frames, from a few weeks to several months. Longer patterns are generally considered more significant.
Trend Context:
Continuation Pattern: In an uptrend, a falling wedge can act as a continuation pattern, indicating a temporary pullback before the uptrend resumes.
Reversal Pattern: In a downtrend, a falling wedge can signal a potential reversal, suggesting that the downtrend may be coming to an end and a bullish trend might follow.
Key Points to Remember
1. The falling wedge is considered a bullish pattern, whether it appears as a continuation in an uptrend or as a reversal in a downtrend.
2. The breakout should be confirmed with increased volume and other technical indicators.
3. The pattern's reliability increases with the duration and the number of touches on the trend lines. ------------------------------------------------------------------------------------------------ Charts are self-explanatory. Levels of breakout, possible up-moves (where stock may find resistances) and support (close below which, setup will be invalidated) are clearly defined.
Disclaimer: This is for demonstration and educational purpose only. This is not buying or selling recommendations. I am not SEBI registered. Please consult your financial advisor before taking any trade.
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