Wedges

A wedge looks like a triangle but both boundary lines slope the same way, and it usually signals a reversal against that slope.

The two types

• Rising wedge — both support and resistance slope up, but support rises faster, squeezing price into the apex. Despite the upward look it is typically bearish — it shows buyers running out of strength — and tends to break down.
• Falling wedge — both lines slope down, resistance falling faster. Despite the downward look it is typically bullish and tends to break up.

How to trade them

• Entry — on the break against the wedge's slope (down out of a rising wedge, up out of a falling wedge).
• Stop — beyond the opposite boundary of the wedge.
• Target — often a return toward where the wedge began.

The catch

The counter-intuitive direction is exactly what trips people up — a rising wedge looks bullish but warns of a top. Wedges also overlap visually with triangles and channels, so they are easy to misidentify. As always, the break with volume is the confirmation; the slope alone is only a hypothesis.