Falling Wedge Pattern: Bullish Exhaustion Reversal
Trade falling wedges: narrowing lower lows, bullish exhaustion, and breakout-to-upside setups.
Quick answer
Trade falling wedges: narrowing lower lows, bullish exhaustion, and breakout-to-upside setups.
- Bullish compression: A falling wedge has both trendlines pointing down, but the lower line falls more slowly than the upper — the move is narrowing.
- Execution: Long on the breakout above the upper wedge trendline with volume confirmation.
- Context matters: Falling wedges in uptrends (continuation) are high-probability.
Bullish compression
A falling wedge has both trendlines pointing down, but the lower line falls more slowly than the upper — the move is narrowing. Each new low takes more effort. This signals seller exhaustion. Falling wedges that form at the end of a downtrend or at a major support often resolve upward with sharp breakouts.
Execution
Long on the breakout above the upper wedge trendline with volume confirmation. Stop below the most recent low. Target: wedge height projected up from breakout. The measured move often carries price back to the start of the wedge.
Context matters
Falling wedges in uptrends (continuation) are high-probability. Falling wedges at major lows (reversals) have higher target payoff but slightly lower hit rates. Both work; just know which one you're trading.
Frequently asked questions
Are falling wedges the best reversal pattern?
Sources and review notes
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