In this video, we’ll be looking at the Wedge formation.

This pattern is also quite similar to the symmetrical triangle, identified by two converging trendlines that meet at an apex. However, it is distinguishable by the obvious slant against the trend.

So, the slant can either be to the upside or the downside, depending on the prevailing trend before this pattern. If the slant is downward, it is indicative of a falling wedge formation, which is bullish. On the other hand, if the slant is upward, it’s indicative of a rising wedge, which is bearish.

If you’re feeling a little confused, don’t worry. We’ll clarify everything right away.

So, in a symmetrical triangle, the upper line is descending while the lower line is ascending until they meet an apex. Here, we have a rising and a falling wedge, which are formed a little differently.

For example, a rising wedge is characterized by an ascending lower line and a slanting upper line. This means that higher lows are forming faster than higher highs. Or, if you prefer the explanation in points, it means that point 4 is significantly higher than point 2 – creating an obvious ascending lower line, while point 3 is only slightly higher than point 1 – creating a slant.

On the other hand, a falling wedge is characterized by a descending upper line and a slanting lower line. This means that the lower highs are forming faster than the lower lows. This means that point 4 is significantly lower than point 2, creating a descending upper line, whereas point 3 is only slightly lower than point 1, making only a slant.

The most important thing to remember about the wedge formation is if the slant is happening in the direction of the trend, it is likely to become a reversal pattern, whereas if it slopes against the trend, it is most likely a continuation pattern.