A Falling Wedge is a bullish chart pattern that takes place in an upward trend, and the lines slope down. When you encounter this formation, it signals that forex traders are still deciding where to take the pair next.

As the lines converge the odds are that if the descending line of resistance is broken then this pattern is either a continuation of an uptrend if it is a bull market or a reversal from a near term price bottom if the pattern forms during a bear market. Wedges signal a pause in the current trend. The lower support trendline should become more stable and flatter as the pattern forms showing selling pressure decreasing. The reversal back above the descending upper trendline resistance is the bullish buy signal, it is not a pattern to buy during the downtrend. The break above the resistance line is a signal that the downtrend could be reversing and creating a potential signal that a new uptrend has begun.Ĭhart by Jake Wujastyk at Ĭhart Summary: The falling wedge is generally a longer-term bullish chart pattern that has a declining line of resistance and a declining line of support. This chart pattern remains in place signaling a downtrend in price until the upper descending trend line is eventually broken by price to the upside. Notice that the $SPY chart below had lower lows and lower highs for several weeks creating a descending upper trend line. Less depth in lows indicate a decrease in the strength of selling pressure and should create a lower trend line of support with less declining slope than the upper line of resistance.

This pattern creates lower lows, but the new lows should become less in magnitude.

This is usually a longer-term pattern that generally forms over a three to six-month timeframe but can also appear on shorter time frames.

The bullish bias in this pattern will not be signaled until a breakout back above the descending resistance to show this is a reversal pattern from lows in price.

This price action forms a descending cone shape that trends lower as the vertical highs and vertical lows move together to converge.

The descending wedge is a bullish chart pattern that begins with a wide trading range at the top and contracts to a smaller trading range as prices trend down.

The descending wedge is a bullish pattern regardless of what kind of market it occurs in.

When it is a reversal pattern, the falling wedge trends down when the overall market is in a downtrend.

When it is a continuation pattern it will trend down, however the slope in the wedge will be against the overall market uptrend. What is the Descending Triangle The descending triangle is formed in the downtrend and indicates the continuation of the downtrend. The descending wedge chart pattern more commonly known as the falling wedge can fit in the continuation or reversal category. The breakout of the prices is confirmed when the prices break from the resistance level with volume and continue to move upwards. The only time you are likely to notice an increase in volume for the upward price action, is when a breakout is in preparation.

Descending wedge breakout price target