TSX:LSG.DB - Post by User
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LexMark747on Oct 27, 2014 1:20pm
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Falling Wedge ... full explanation from Stockcharts.com
Falling Wedge ... full explanation from Stockcharts.com
Falling Wedge The falling wedge is a generally bullish pattern signaling that one will likely see the price break upwards through the wedge and move into an uptrend. The trendlines of this pattern converge, with both being slanted in a downward direction as the price is trading in a downtrend. Figure 1: Falling wedge pattern From the above, one can see that a wedge is similar to the triangles, in that the price movement bounces between the two trendlines, which are bounding the price movement. Another thing to look at in the falling wedge is that the upper (or resistance) trendline should have a sharper slope than the support level in the wedge construction. When the lower (or support) trendline is clearly flatter as the pattern forms, it signals that selling pressure is waning, as sellers have trouble pushing the price down further each time the security is under pressure. The price movement in the wedge should at minimum test both the support trendline and the resistance trendline twice during the life of the wedge. The more times it tests each level, especially on the resistance end, the higher quality the wedge pattern is thought to be. The buy signal is formed when the price breaks through the upper resistance line. This breakout move should be on heavier volume, but due to the longer-term nature of this pattern, it's important that the price has successive closes above the resistance line.