Rising wedge patterns are bearish and are found at the ends of uptrends as well as during downtrends. In either case, a downside break from a rising wedge pattern is a technical sell signal or short sell signal. The rising wedge pattern is a reliable short sell indication.
Context: When found within a downtrend, the rising wedge is a continuation pattern with similar characteristics of a bear flag pattern. When found within the context of an uptrend, the rising wedge is an indication that an uptrend may soon reverse course with downside price action to follow.
Appearance: The rising wedge pattern is a contracting trading range with an upward tilt. This may be seen by drawing two rising trend lines, one steeper trend line connecting minor lows, and a shallower trend line connecting minor highs. The early portion of the wedge has a wider price range, while the latter stages of a rising wedge are characterized by tighter price action. Volume expansion which accompanies a breakdown from a rising wedge pattern adds reliability when trading this pattern.
Breakout Expectation: A breakdown from a rising wedge pattern should be accompanied by volume expansion as rising support is broken and selling accelerates. Stronger volume and a higher intensity that accompanies the selling makes this pattern more reliable.
This stock formed a pair of rising wedge patterns during its downtrend. Each rising wedge led to further downside, with the sell signal or the short sell signal being the downside break of the lower rising trend line.
Rising wedge patterns offer reliable signals for short selling, so we highlight them within downtrends for members of our stock pick service. Come trade with us!
Learn more about wedge patterns like the falling wedge pattern.
