“Rising Wedge” patterns are similar to “Symmetric Triangles” but “Rising Wedge” patterns form in an angle where as “Symmetric Triangles” are mostly horizontally formed. “Rising wedge” patterns have higher highs and higher lows and are connected with two angled (slanted) trend lines. These trend lines converge at the top. The price must intersect each trend line at least twice before the pattern fully emerges.
“Rising wedges” are usually bearish in both uptrend and downtrend markets. In addition, they have a high failure rate and are relatively difficult to spot them. They seem to work well in bullish markets.
Trade:
“Rising wedges” are defined by the trend lines connecting the highs and lows of the pattern. The price trading outside the lower trend line signals a potential short trade. A “short” trade is entered when the prices close below the breakdown’s bars low (must be below the trendline).
Target:
After trade entry, a target is set at the lowest point in the wedge formation. Another target measure would be the length of “wedge” pattern from the breakdown level.
Stop:
Place a “stop” order above the last “swing high” of the “wedge” pattern.
Trading Rising Wedge Pattern
Trading Rising Wedge Pattern
The example above illustrates a “Rising wedge” pattern from the Russell Emini futures (EM) 6 10 tick chart. ER2 made a “Rising wedge” pattern in a downtrend. The pattern suggests a pullback rally in downtrend. ER2 made higher highs and higher lows with trend lines connecting in an angle suggesting a potential opportunity for a “short” trade when prices close below the trend line.
- Enter a “short” trade below the low of the breakdown bar (at C).
- Place a “stop” order few ticks above previous swing high at B.
- The first target is placed at 100% of the AB range from C.
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