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The breakout from the Falling Wedge occurs when the price breaks above the upper trendline that was forming a resistance line. The pattern should have at least two test of both the upper resistance trendline and the lower support trendline. This indicates that selling pressure is drying up as sellers are not able to push the price down as effectively as before. The Falling Wedge is bound by two trendlines that have a downward slope with the upper trendline (the resistance line) having a more acute slope, or a steeper slope, than the lower trendline (the support line). The Falling Wedge PatternĪ Falling Wedge is a bullish pattern though the price action in the wedge itself would be bearish. In Elliot Wave theory, however, the wedge must be in the direction of the preceding trend, the motive wave, and cannot be corrective or reactionary. Wedge patterns are also part of the Elliott Wave Principle where they are seen as diagonal triangles. Volume is an important characteristic of a Wedge and should decrease during the formation of the Wedge and increase on the breakout. At least five pivot points (peaks or valleys) are required to form a wedge, with three pivots on the one trendline and two on the other. They, unlike the symmetrical triangle, are slanted either to the upside, making it a Rising Wedge, or to the downside, making it a Falling Wedge. The Wedge pattern is similar to the symmetrical triangle as they too have converging trend lines that meet at an apex. The pattern itself does not mark the reversal of the preceding trend the breakout from the pattern marks the reversal of the trend formed within the Wedge pattern.

Similarly, a Falling Wedge is often preceded by an uptrend but it can also be found in a downtrend. It is important to note that while the Rising Wedge is often preceded by a downtrend, it can also be found in an uptrend. In either case, the breakout is often in the opposite direction of the trend that forms in the wedge itself. The Wedge formations are reversal patterns that can appear bullish, in the case of a Rising Wedge, or bearish, in the case of a Falling Wedge.