Wedge figure analysis
A sloping trend line is called a wedge; however, both trend lines will slope instead on one of the lines being horizontal. When an ascending wedge occurs it indicates that there are more participants in the market selling and often indicates that any upward momentum will begin to slow. Breakouts that occur in wedges always follow the opposite direction of the original move. They can be easily identified by a retracement that begins lower than the previous peak.
It should be noted that many major market trends have ended with either a ascending or descending wedge.
The Two Types of Wedges:
- Ascending wedge
- Descending wedge