Trading consolidated between two lines that edged ever closer to each other, but shortly before the lines met the index broke below support and began a bear run. In early 2018, the Russell 2000 index entered into a wedge that precipitated the end of a long bull market. A spike in volume after it breaks out is a good sign that a bigger move is on the cards. This will enable you to ensure that the move is confirmed before opening your position.Īnother common signal of a wedge that’s close to breakout is falling volume as the market consolidates. As a result, you can wait for a breakout to begin, then wait for it to return and bounce off the previous support area in the ascending wedge. Alternatively, you can use the general rule that support turns into resistance in a breakout, meaning the market may bounce off previous support levels on its way down. Essentially, here you are hoping for a significant move beyond the support trendline for a rising wedge, or resistance for a falling one.įor ascending wedges, for example, traders will often watch out for a move beyond a previous support point. One way to confirm the move is to wait for the breakout to start. Not all wedges will end in a breakout – so you’ll want to confirm the move before opening your position. Rising wedge vs falling wedge: what’s the difference? You can try out the IG trading platform with a demo account. To spot them, though, you’ll need a platform with powerful charting tools: such as the IG trading platform or MetaTrader 4. Studies have shown that falling wedges lead to breakouts slightly more often than rising ones. This is a sign that bullish opinion is either forming or reforming. But in this case, it’s important to note that the downward moves are getting shorter and shorter. When a market is falling, they’re a sign that traders are reconsidering the bear moveĪs with their counterpart, the rising wedge, it may seem counterintuitive to take a falling market as a sign of a coming bull move.
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