A wedge is a chart pattern characterized by converging trend lines on a price chart. This pattern consists of two trend lines that move in the same direction, creating a narrowing channel until one of the trend lines is broken. The resulting shape resembles a gradually narrowing wedge. The upper trendline serves as resistance, while the lower trendline acts as support.

Since a wedge pattern features converging trend lines that meet at an apex, it bears a resemblance to a symmetrical triangle. However, wedges have a distinct slant, either upward or downward. Wedge patterns are recognized as trend reversal chart patterns and can indicate either bullish or bearish reversals.

The wedge pattern has three common characteristics: converging trend lines, declining volume as the price moves through the pattern, and a breakout from one of the trend lines.

There are two types of wedge chart patterns: the rising wedge, which signals a bearish reversal, and the falling wedge, which signals a bullish reversal.

Rising Wedge

A rising wedge (or ascending wedge) is formed when two trend lines slope upward, creating a narrowing channel marked by a series of higher highs and higher lows. The rising wedge is generally viewed as bearish and is typically found in downtrends. Although it can also appear in uptrends, it is still considered bearish.

As the trend lines approach convergence, a sharp sell-off occurs, leading to a price collapse through the lower trend line. This breakdown triggers panic selling among buyers. The rising wedge is a bearish pattern and is the inverse of the falling wedge.

Falling Wedge

A falling wedge (or descending wedge) is created when two trend lines slope downward, forming a narrowing channel characterized by a series of lower highs and lower lows. The falling wedge is generally regarded as bullish and is typically found in uptrends. While it can also occur in downtrends, it is still seen as bullish.

As the trend lines near convergence, a significant spike occurs, breaking the price through the upper trend line. This breakout prompts sellers to exit their short positions, causing the price to rise further, as sellers must buy to close their short positions. The falling wedge is a bullish pattern and is the inverse of the rising wedge.

A wedge is a chart formation that illustrates a narrowing price range over time, where the price highs in an ascending wedge decrease incrementally, or in a descending wedge, the price declines are incrementally smaller. Rising wedges typically conclude with a downside breakout, while falling wedges usually end with an upside breakout.