Falling Wedge Pattern: Bullish Exhaustion Reversal
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. 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.