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As a result, some starts to sell and take profits, which pushes the price lower. For starters, divergence happens when an asset’s price is rising while oscillators like the Relative Strength Index (RSI) and the MACD are falling. Viktor has an MSc in Financial Markets and years of investing experience. His preferred instruments are ETFs but also maintains a portfolio of cryptocurrencies.
What happens after a rising wedge pattern?
A rising wedge formed after an uptrend usually leads to a REVERSAL (downtrend) while a rising wedge formed during a downtrend typically results in a CONTINUATION (downtrend). Simply put, a rising wedge leads to a downtrend, which means that it's a bearish chart pattern!
Notice how we are once again waiting for a close beyond the pattern before considering an entry. That entry in the case of the falling wedge is on a retest of the broken resistance level which subsequently begins acting as new support. Notice in the image above we are waiting for the market to close below the support level.
Support
However because these wedges are directional and thus carry a bullish or bearish connotation, I figured them worthy of their own lesson. Conversely, the two ascending wedge patterns develop after a price increase as well. For this reason, they represent the exhaustion of the previous bullish move. After the two increases, the tops of the two rising wedge patterns look like a trend slowdown. Hence, they are bearish wedge patterns in the short-term context.
However, they can occur in the middle of a strong upward movement, in which case the bullish movement at the end of the wedge is a continuation of the overall bullish trend. For example, if you have a rising wedge, the signal line is the lower level, which connects the bottoms of the wedge. If you have a falling wedge, the signal line is the upper level, which connects the formation’s tops. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money.
Trading a rising or falling wedge pattern
Now that we’re in a trade we need to find our target, which brings us to the next step. If you’re new to trading, we highly recommend you read the Beginner’s Guide to Financial Markets, where you’ll learn the basics of what trading is all about. FXOpen is a global forex and CFD broker, with a network of worldwide brokerages regulated How to Trade Rising Wedge Pattern by the FCA, CySEC and ASIC. FXOpen offers ECN, STP, Micro and Crypto trading accounts (dependent on entity). This article represents the opinion of the Companies operating under the FXOpen brand only. See the lesson on the head and shoulders pattern as well as the inverse head and shoulders for detailed instruction.