WEEKLY FALLING WEDGE EURGBP-61.8% Target With Wicks to MS
Shape and Structure:
The falling wedge is a converging pattern where both the upper and lower trendlines slope downwards.
The upper trendline, which acts as resistance, is steeper than the lower trendline, which acts as support.
The price action within the wedge shows lower highs and lower lows.
Volume:
Volume tends to decrease as the pattern develops, reflecting a reduction in trading activity.
A spike in volume often accompanies the breakout, confirming the pattern.
Trend:
The falling wedge can appear in two scenarios: within an overall uptrend (as a continuation pattern) or within a downtrend (as a reversal pattern).
When it appears in an uptrend, it usually indicates a pause before the price continues to rise.
When it appears in a downtrend, it suggests a potential reversal to an upward trend.
Interpretation and Trading Strategy
Formation:
The falling wedge forms over a period during which prices make a series of lower highs and lower lows.
The pattern is considered complete when the price breaks above the upper trendline.
Breakout:
Traders often look for a breakout above the upper trendline to confirm the pattern.
The breakout is ideally accompanied by increased volume, adding strength to the signal.
Entry Point:
A common entry point is when the price closes above the upper trendline after the breakout.
Stop-Loss Placement:
Traders usually place a stop-loss order below the most recent low within the wedge to manage risk.
Price Target:
The price target is often estimated by measuring the height of the wedge at its widest point and projecting that distance upwards from the breakout point.
The falling wedge is a converging pattern where both the upper and lower trendlines slope downwards.
The upper trendline, which acts as resistance, is steeper than the lower trendline, which acts as support.
The price action within the wedge shows lower highs and lower lows.
Volume:
Volume tends to decrease as the pattern develops, reflecting a reduction in trading activity.
A spike in volume often accompanies the breakout, confirming the pattern.
Trend:
The falling wedge can appear in two scenarios: within an overall uptrend (as a continuation pattern) or within a downtrend (as a reversal pattern).
When it appears in an uptrend, it usually indicates a pause before the price continues to rise.
When it appears in a downtrend, it suggests a potential reversal to an upward trend.
Interpretation and Trading Strategy
Formation:
The falling wedge forms over a period during which prices make a series of lower highs and lower lows.
The pattern is considered complete when the price breaks above the upper trendline.
Breakout:
Traders often look for a breakout above the upper trendline to confirm the pattern.
The breakout is ideally accompanied by increased volume, adding strength to the signal.
Entry Point:
A common entry point is when the price closes above the upper trendline after the breakout.
Stop-Loss Placement:
Traders usually place a stop-loss order below the most recent low within the wedge to manage risk.
Price Target:
The price target is often estimated by measuring the height of the wedge at its widest point and projecting that distance upwards from the breakout point.
Disclaimer
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