Rising Wedge

Rising Wedge is a continuation chart pattern, formed by price action, which is contained with in a converging and ascending trend lines.

Pattern Formation
In a downtrend, we can get an apparent but minor trend reversal price action with higher highs and higher lows. The trend lines connecting the highs and lows, will result in, up ward pointing, wedge shaped triangle.

These triangles differ from other triangular formations by having both upper and lower lines, slanting upwards but lower line is more steeper than the upper line. While in a symmetrical triangle, upper line is pointing downwards and lower line is pointing upwards. In an ascending triangle, upper line is horizontal and lower line is pointing upwards. In a descending triangle, lower line is horizontal and upper line is pointing downwards.

In a wedge successive swings will have contracting ranges (diminishing range) with reduced volume. This gives us the clue that the apparent up trend is loosing steam. So it is not a classical up trend. But a corrective rally in a downtrend. So be prepared for the downward break out in the direction of the previous trend.

Study the chart given below.

Variation
If we get a rising wedge formation in an up trend, that indicates slowing of up trend. When it breaks out downwards, it naturally becomes a reversal chart pattern.

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