Wedges are a multiple price wave reversal pattern. Wedges form when the waves of an asset move within a narrowing range, angled either up or down. Whereas triangles are formed by the price moving sideways, wedges can make significant progress either up or down.
When the pattern completes, and the price breaks out of wedge, it is usually in the opposite direction the wedge was pointed. This is why it is called a reversal pattern. For example, if a wedge is angled downward—called a "falling wedge"—the price will often break above the top of the pattern and rally. In the case of a wedge angled upwards—a "rising wedge"—the breakout is typically to the downside, indicating lower prices to come.
When the pattern completes, and the price breaks out of wedge, it is usually in the opposite direction the wedge was pointed. This is why it is called a reversal pattern. For example, if a wedge is angled downward—called a "falling wedge"—the price will often break above the top of the pattern and rally. In the case of a wedge angled upwards—a "rising wedge"—the breakout is typically to the downside, indicating lower prices to come.
