The Descending Wedge pattern The Descending Wedge pattern is a technical analysis chart pattern that indicates a potential reversal or continuation in a market trend. It is formed by two converging trendlines where the upper trendline is descending more sharply than the lower one. Here’s what it generally implies:
Structure:
Upper Trendline: Drawn through the highs of the price movement, sloping downwards.
Lower Trendline: Drawn through the lows, also sloping downwards but at a less steep angle.
Implications:
Bullish Reversal: In a downtrend, a descending wedge is often considered a bullish signal, suggesting that the downward momentum is weakening and a breakout to the upside might occur.
Continuation Pattern: In some cases, especially during an uptrend, a descending wedge may act as a continuation pattern, signaling a temporary consolidation before the trend resumes.
Key Points:
Breakout: The pattern is confirmed when the price breaks above the upper trendline. This breakout is often accompanied by increased trading volume, adding to the strength of the signal.
Target: The price target after a breakout is often estimated by measuring the widest part of the wedge and projecting it upwards from the point of breakout.
In summary, a descending wedge is typically seen as a bullish pattern that could lead to a significant price movement upwards once the resistance is broken.
