Wedges

Overview

A wedge is a converging pattern in which both trendlines slope in the same direction. It looks similar to a triangle, but with a decisive difference — in a triangle the two boundaries oppose each other (or one is horizontal), while in a wedge they both slant up, or both slant down.

That "tilting together" tells the essence. Price still keeps making higher highs (or lower lows) — but the size of each push grows smaller. On the surface the trend continues. Underneath, the force that drove it has already been spent.

A wedge is a reversal pattern. A rising wedge is bearish; a falling wedge is bullish — bearish while rising, bullish while falling. That paradox is precisely the wedge's reading.