Rising wedge pattern

A rising wedge is a bearish chart pattern bounded by two upward-sloping trend lines. The lower line, through the lows, is steeper than the upper line, through the highs. Buyers keep lifting the lows, but each new high beats the previous one by a smaller margin.

It looks like an uptrend, which is what makes it easy to misread. The narrowing range shows the advance losing momentum while price still prints new highs.

On Charts the trend line tool draws both sides of the wedge, and Replay shows how past wedges resolved candle by candle. What to check:

• Two rising trend lines – both slope up. If the upper line is flat, the pattern is an ascending triangle, not a wedge.
• Convergence – the lines get closer as the pattern develops. Parallel lines make a rising channel, which is a plain uptrend.
• Touches – at least two highs on the upper line and two lows on the lower one. More touches give the lines more weight.
• Price fills the wedge – it swings from line to line without large empty areas.
• Volume – usually declines as price climbs inside the wedge.
• Momentum – new highs in price with lower highs on RSI are a common extra sign of a tiring advance.
• Breakout – a candle close below the lower trend line.

A rising wedge is read as bearish in both places where it forms. After an uptrend it is a reversal pattern: the trend ends with smaller and smaller gains. Inside a downtrend it is a corrective rally, and a break of the lower line continues the decline.

The bearish reading is cancelled if price closes above the upper trend line. The advance is then accelerating, not fading.

A rising wedge gives a short trade, and only after the lower line breaks.

• Entry – on the candle close below the lower trend line, or on a retest of that line from below.
• Stop – above the last high inside the wedge.
• Target – the base of the wedge, the low where the pattern began. Another common measure is the height of the wedge at its widest part, subtracted from the breakout price.
• Example – a wedge starts at a low of 100 and narrows up to a high near 139. Price closes below the lower line at 128. The stop goes above 139, and the target is the 100 low.
• The target is an estimate. The nearest support on the way is a common place to take part of the profit.

Both patterns have rising lows. The difference is the upper line. In an ascending triangle the highs stop at one horizontal resistance, and the pattern is usually read as bullish: buyers pay more on every dip while sellers hold a single level. In a rising wedge the highs rise too, but more slowly than the lows, and the pattern is read as bearish.

The two are watched on opposite sides: the flat top of an ascending triangle for a break up, the lower line of a rising wedge for a break down.

A bear flag starts with a sharp drop, the flagpole, followed by a short bounce between two parallel lines. A rising wedge needs no flagpole, takes longer to form, and its lines converge.

A rising channel has parallel lines: highs and lows climb at the same pace, and there is no narrowing to read.

• Shorting inside the wedge – price can keep making higher highs for a long time before the lower line breaks.
• Reading it as a healthy uptrend – the higher highs and higher lows are there, but the range is shrinking.
• Forcing the lines – trend lines that cut through candle bodies or rest on a single touch do not define a wedge.
• Stop inside the pattern – a retest of the broken line is normal. A stop above the last high leaves room for it.
• Ignoring the higher timeframe – a small rising wedge inside a strong weekly uptrend often leads to a shallow pullback only.