Wedges

[John Aaby]

What is the difference between the ascending and descending wedge?

[Rishabh Tyagi]

Ascending Wedge

Shape: An ascending wedge is characterized by two trendlines that converge in an upward direction, with the upper trendline sloping at a steeper angle than the lower trendline.

Interpretation: Ascending wedges typically form during a price uptrend and are considered bearish reversal patterns. They indicate a weakening bullish momentum, with buyers becoming less aggressive while sellers gain strength. Traders often interpret an ascending wedge as a sign of an impending downward price movement.

Breakout Direction: The breakout from an ascending wedge pattern is typically to the downside. Once the price breaks below the lower trendline, it suggests a potential trend reversal or a continuation of the previous downtrend.

 

Descending Wedge

Shape: A descending wedge, on the other hand, consists of two converging trendlines, but in a downward direction. The upper trendline has a shallower slope compared to the lower trendline.

Interpretation: Descending wedges typically occur during a price downtrend and are considered bullish reversal patterns. They signify a weakening bearish momentum, with sellers becoming less aggressive while buyers gain strength. Traders often interpret a descending wedge as a signal for an upcoming upward price movement.

Breakout Direction: The breakout from a descending wedge pattern is usually to the upside. When the price breaks above the upper trendline, it suggests a potential trend reversal or a continuation of the previous uptrend.

 

To learn more, you can check out these guides with examples; 

Rising Wedge: https://www.asktraders.com/learn-to-trade/technical-analysis/rising-wedge/

Falling Wedge: https://www.asktraders.com/learn-to-trade/technical-analysis/falling-wedge/

[Elise Cubb]

Hi John, thanks for the question.

Both ascending and descending wedges are popular formations. The former is a bearish chart pattern that signals a likely breakout to the downside. It is also called a rising wedge which usually takes place within a downtrend. A break of the lower line signals a breakout and continuation of the existing downtrend. 

The latter, on the other hand, is a bullish chart formation and it works in the opposite manner. The break of the upper line signals a breakout that is likely to take the price action higher. 

In a wedge, two parallel trend lines are moving to each other i.e. concerning. The break out occurs before these two converge. 

The greatest advantage of both is that they signal an imminent change in the trend direction. The energy of the price action is consolidating between the two parallel lines. The chart pattern is activated once the breakout takes place and the price action closes outside of the wedge on a daily chart.