Rising and falling wedges are converging trendline patterns where both support and resistance slope in the same direction. A rising wedge (both lines slope upward, converging) is typically bearish, while a falling wedge (both lines slope downward, converging) is typically bullish. Wedges differ from triangles because both trendlines slope in the same direction rather than converging symmetrically.
Rising wedge: both trendlines slope upward with converging angle, bearish bias. Falling wedge: both trendlines slope downward with converging angle, bullish bias. Diminishing momentum visible through progressively smaller price swings. Volume generally contracts throughout the pattern. At least five touches of the trendlines (three on one, two on the other) for validity.
Enter on a confirmed break below the rising wedge support or above the falling wedge resistance with volume expansion. Wait for a retest of the broken trendline for a safer entry point. Look for bearish divergence on RSI within a rising wedge, or bullish divergence within a falling wedge. Confirm with a candle close outside the pattern, not just an intraday wick.
Measured-move target equals the widest point of the wedge projected from the breakout. Place stops on the opposite side of the wedge's last swing point. Partial exits at 1:1 risk-reward with the remainder trailing toward the full target. Invalidation occurs if price re-enters the wedge after breaking out.
1H, 4H, Daily
Rising wedges are especially powerful after extended uptrends because they represent weakening buying pressure despite higher prices. Falling wedges found at market bottoms can produce explosive rallies. Always wait for a confirmed close outside the wedge rather than trading the initial wick break.
Pennants are short-term continuation patterns that form after a strong directional move. They resemble small symmetrical triangles, with converging trendlines creating a compact consolidation zone. Unlike flags, which have parallel channels, pennants converge to a point. The breakout typically occurs in the same direction as the preceding move, with the measured target based on the flagpole.
Bull and bear flags are continuation patterns consisting of a sharp price move (the flagpole) followed by a brief, counter-trend consolidation channel (the flag). Bull flags slope downward after an upward pole; bear flags slope upward after a downward pole. These patterns represent a pause in strong momentum before the trend resumes, and they are among the most commonly traded continuation setups.
Triple tops and triple bottoms are reversal patterns where price tests the same level three times before reversing. They are essentially double tops and bottoms with an additional test, making them rarer but potentially more significant. The three-touch structure confirms that a price level is acting as a strong barrier, and the eventual break of the pattern's support or resistance level triggers the reversal.
The inverse cup and handle is a bearish continuation or reversal pattern that mirrors the bullish cup and handle formation. It consists of a rounded top (the inverted cup) followed by a brief upward consolidation (the handle). The pattern indicates that buying attempts fail to sustain higher prices, and the handle's upward drift represents a final weak rally before sellers take control, breaking price below the handle's support.