Wedge Patterns: Rising and Falling Wedges

Where this page's information comes from

• StockCharts' ChartSchool, its guides to the rising wedge and the falling wedge, for the conventions on shape, prior trend, duration, volume, confirmation and retests. Those points are attributed in the text.
• Thomas Bulkowski's pages on rising and falling wedges and his glossary on ThePatternSite, for his identification notes, his simple price-target conventions and his definitions of pullbacks, throwbacks and busted patterns.
• TradingLoot's own explanations and diagrams. They describe how these patterns are commonly read, not rules that guarantee an outcome.

Bulkowski's pages also publish performance statistics, and an alternative target method that depends on them. This guide leaves those out, because the market, period and method behind the figures aren't set out on those pages. For how he measured patterns, see our summary of his encyclopedia.

How wedges form

A wedge is drawn with two lines: one through the reaction highs and one through the reaction lows. Both lines slope in the same direction, but at different angles, so the range between them narrows as the pattern develops. Bulkowski describes each as price bouncing between two converging trendlines, sloping up in a rising wedge and down in a falling one.

The narrowing is what separates a wedge from a channel. In TradingLoot's reading, it also shows that each swing is making less progress than the one before: in a rising wedge, the highs keep rising but by less than the lows; in a falling wedge, the lows keep falling but by less than the highs.

The rising wedge

ChartSchool describes the rising wedge as a pattern that starts wide at the bottom and contracts as prices move higher. Each reaction high is above the previous one, and so is each reaction low, but the lower line rises faster, so the upper line fails to keep pace. ChartSchool reads that as a sign of supply building as prices rise, and treats the pattern as bearish.

The falling wedge

The falling wedge is the mirror image. ChartSchool describes it as a cone that slopes down as the reaction highs and lows converge: each low goes below the previous one, but by less each time. It treats the pattern as bullish, and says the bullish case is only realised when resistance breaks.

Reversal or continuation: the prior trend

The same shape can be read two ways, depending on what came before it. ChartSchool says that to qualify as a reversal pattern, a wedge needs a prior trend to reverse: a rising wedge after an advance, or a falling wedge after a decline. For the falling wedge, it adds that the preceding downtrend should ideally be at least three months old. A wedge can also form as a pause, sloping against the prevailing trend: a falling wedge within an uptrend, or a rising wedge within a downtrend.

ChartSchool keeps the same bias in both cases: rising wedges bearish, falling wedges bullish, whether read as reversal or continuation. Bulkowski takes a looser view of the lead-in, noting that the price trend before a wedge can run in any direction.

In TradingLoot's view, the useful question is not which label to apply but which move the wedge is a reaction to. The context tells you what a break would mean; it doesn't tell you which way the break will go.

Wedges, channels, triangles and pennants

Three neighbouring shapes are easy to confuse with a wedge:

• Channel: both lines slope the same way, but they stay parallel. Without convergence, there is no wedge.
• Triangle: the lines converge, but they don't share a slope. In a symmetrical triangle one falls and the other rises; in ascending and descending triangles one line is flat. ChartSchool contrasts symmetrical triangles, which it says have no definitive slope and no bias, with wedges, which slope and carry one.
• Pennant: a brief, narrowing pause after a sharp pole. Bulkowski draws the line by time: a wedge needs at least three weeks, otherwise he calls it a pennant. As the flags and pennants guide explains, a pennant's lines normally slope in opposite directions, and the pole before it is what defines it.

Directional bias vs breakout direction

The two sources frame direction differently. ChartSchool attaches a bias to each wedge: bearish for rising, bullish for falling. Bulkowski's identification notes say the breakout can go in either direction, for both wedges. Both views can be held at once: a bias is how a pattern is traditionally read, and the breakout is what price actually did.

That's why the diagrams above show the alternative exit as a separate dashed branch. Once price closes outside the wedge, you know the direction it took. That doesn't guarantee the move will continue or reach a target. As the hub explains, a pattern's family is a convention, not a promise about direction.

Confirmation and volume

Bulkowski treats a wedge as confirmed when price closes outside one of its lines. ChartSchool sets a stricter bar for its bearish and bullish readings: a convincing break of the lower line in a rising wedge, or of the upper line in a falling wedge. It adds that waiting for price to clear the previous reaction low, or reaction high, can be prudent extra confirmation. Sources differ on what counts as convincing, and the hub explains the filter trade-off.

ChartSchool doesn't give volume the same weight for both wedges. For the rising wedge, it says volume ideally declines as the pattern develops, and that an expansion of volume on the break of the lower line can be taken as confirmation. For the falling wedge, it calls volume an essential ingredient: without an expansion on the breakout, it says, the move lacks conviction and is vulnerable to failure. Its falling-wedge guide also notes that volume isn't particularly important on rising wedges.

How much weight volume can carry depends on the data. In TradingLoot's view, the volume a platform shows may not represent the whole market, for example where trading is spread across many venues, and some feeds show tick counts rather than traded volume. Treat volume as one input to weigh, not a switch that confirms or cancels a pattern.

Retests, pullbacks and throwbacks

After a breakout, price may come back to the line it just crossed. ChartSchool describes broken support in a rising wedge sometimes being tested as new resistance, and broken resistance in a falling wedge sometimes being tested as new support. Bulkowski names these returns by direction: a throwback after an upward breakout and a pullback after a downward one, each a return to the breakout price within 30 days.

A retest is a possibility, not a step in the pattern. A return that carries back through the wedge and out the other side isn't a retest any more: it's a failed breakout.

Projection conventions

Here the sources genuinely differ. ChartSchool's rising-wedge guide says there are no measuring techniques to estimate the decline, and points to other forms of technical analysis for price targets. Its falling-wedge guide doesn't offer a projection method either, without ruling one out.

Bulkowski gives a simple reference level for one case of each wedge:

• Rising wedge, downward breakout: the lowest valley within the wedge.
• Falling wedge, upward breakout: the highest peak within the wedge.

His pages state each rule only for that breakout direction, so this guide doesn't extend them to a rising wedge that breaks upward or a falling wedge that breaks downward. Treat either level as a reference point from a source's convention, not a forecast of distance or timing. Wedge targets also shouldn't be borrowed from other patterns: neither source applies a flag's pole length or a triangle's height here. For why TradingLoot doesn't publish hit rates for targets, see probabilities and limits.

Touches and duration

The sources set different bars for a well-formed wedge. ChartSchool asks for at least two reaction highs on the upper line, ideally three, and at least two reaction lows on the lower line. Bulkowski asks for more: price should touch each line at least five times to outline a good pattern.

On duration, ChartSchool says both wedges usually form over three to six months. Bulkowski sets a minimum of three weeks, below which he would call the shape a pennant. The two aren't in conflict, one being a typical range and the other a floor, but both are a source's conventions stated in weeks and months, and ChartSchool's examples are stock charts spanning months. In TradingLoot's view, they don't convert automatically to intraday charts. What carries over is the structure: enough clear touches on both lines, converging at a visible angle.

False breakouts and failed patterns

ChartSchool describes both wedges as among the most difficult chart patterns to recognise and trade accurately. A wedge can go wrong before or after the breakout. Before it, the lines may need redrawing as new swings arrive, or the shape may turn out to be a channel or triangle. After it, price can leave the wedge, make little progress, and fall back through it. That second case is a failed breakout, shown below for a falling wedge; a failed rising wedge is the mirror image.

Bulkowski uses a narrower, technical term for one kind of failure. His busted pattern is one where price moves no more than 10% after the breakout, then reverses and crosses the other side of the pattern, starting a trend in the new direction. Not every failed breakout meets that definition, and the diagram doesn't measure it. For why failures still carry information, see our summary of Bulkowski's research on failure.

Textbook vs live charts

Live wedges are rarely as clean as the diagrams. Swings overshoot or fall short of the lines, the angle of convergence can be slight enough to pass for a channel, and the lines often have to be redrawn as the pattern extends. The tidier the drawing has to be forced, the less the label is telling you.

In TradingLoot's view, practising on historical data with replay is a good way to check whether you would have drawn both lines in real time, rather than after the breakout.

Common misreadings

These are ways wedges are often misread, as TradingLoot sees it.

"Any narrowing pattern is a wedge."

Only if both lines slope the same way. Lines sloping in opposite directions make a triangle or pennant.

"A rising wedge is bullish because it's rising."

The name describes the slope. ChartSchool reads the rising wedge as bearish, and the falling wedge as bullish.

"A falling wedge always breaks upward."

ChartSchool reads it as bullish, but Bulkowski notes the breakout can go either way, and the breakout decides the exit.

"A breakout means the move will continue."

It shows the direction price took. It doesn't guarantee follow-through.

"Every wedge has a measured target."

ChartSchool gives no measuring technique for the rising wedge's decline, and Bulkowski's reference levels cover one breakout direction for each wedge.

Key takeaways

• A wedge has two converging lines that slope the same way.
• The prior trend decides whether it's read as a reversal or a pause.
• Bearish and bullish biases are a source's interpretation; the breakout decides the exit.
• A confirmed breakout shows direction, not follow-through.
• Touch counts, durations and price targets are conventions, and the sources differ on them.
• A busted pattern is Bulkowski's narrower definition of one kind of failure.

Further reading

• Triangle Patterns: converging boundaries that don't share a slope, and why the breakout can go either way.
• Flag and Pennant Patterns: short pauses after a sharp pole, between parallel or converging lines.
• Head and Shoulders Pattern: a reversal pattern confirmed by a break of its neckline.
• Double Top and Double Bottom Patterns: two similar peaks or lows, confirmed by a break of the level between them.
• Encyclopedia of Chart Patterns by Thomas Bulkowski: how he measured patterns, including how they fail.
• Technical Analysis of the Financial Markets by John J. Murphy: a broad foundation in which price patterns are one of many tools.
• Chart Patterns: the method that applies to every pattern.