Rising and falling wedges are converging trendline patterns where both support and resistance slope in the same direction. A rising wedge (both lines slope upward, converging) is typically bearish, while a falling wedge (both lines slope downward, converging) is typically bullish. Wedges differ from triangles because both trendlines slope in the same direction rather than converging symmetrically.
Rising wedge: both trendlines slope upward with converging angle, bearish bias. Falling wedge: both trendlines slope downward with converging angle, bullish bias. Diminishing momentum visible through progressively smaller price swings. Volume generally contracts throughout the pattern. At least five touches of the trendlines (three on one, two on the other) for validity.
Enter on a confirmed break below the rising wedge support or above the falling wedge resistance with volume expansion. Wait for a retest of the broken trendline for a safer entry point. Look for bearish divergence on RSI within a rising wedge, or bullish divergence within a falling wedge. Confirm with a candle close outside the pattern, not just an intraday wick.
Measured-move target equals the widest point of the wedge projected from the breakout. Place stops on the opposite side of the wedge's last swing point. Partial exits at 1:1 risk-reward with the remainder trailing toward the full target. Invalidation occurs if price re-enters the wedge after breaking out.
1H, 4H, Daily
Rising wedges are especially powerful after extended uptrends because they represent weakening buying pressure despite higher prices. Falling wedges found at market bottoms can produce explosive rallies. Always wait for a confirmed close outside the wedge rather than trading the initial wick break.
Measured move projections use the length of a prior price swing to forecast the target of the next swing in the same direction. The technique assumes market symmetry — that the second leg of a move will approximate the distance of the first leg. Measured moves apply to impulse waves, corrective patterns, and chart pattern breakouts, providing objective price targets that remove subjectivity from exit planning.
Diamond patterns are relatively rare reversal formations that combine a broadening pattern followed by a symmetrical triangle, creating a diamond-shaped outline on the chart. They typically appear at market tops (diamond top) or, less commonly, at bottoms (diamond bottom). The pattern signals an exhaustion of trend momentum as volatility first expands then contracts before a decisive breakout.
Rectangle patterns form when price trades sideways between two parallel horizontal lines — a clearly defined support and resistance. Rectangles represent a period of equilibrium where buyers and sellers are evenly matched. The pattern resolves when price breaks decisively through one of the boundaries, often continuing in the direction of the prior trend.
Ascending triangles form when price creates a horizontal resistance line at the top and a rising support trendline at the bottom, indicating buyers are becoming more aggressive. Descending triangles feature a horizontal support floor with a declining resistance trendline, suggesting sellers are gaining control. Both patterns are typically continuation patterns that resolve in the direction of the prevailing trend with a measured move target equal to the triangle's height.