Wedge

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DEFINITION of 'Wedge'

In technical analysis, a security price pattern where trend lines drawn above and below a price chart converge into an arrow shape. Wedge shaped patterns are thought by technical analysts to be useful in analyzing a short to intermediate term reversal of what the analyst feels to be the major price trend.

BREAKING DOWN 'Wedge'

Once the price breaks out of the wedge, it is expected to return to the major trend. Technical analysts see a 'breakout' of this wedge pattern as either bullish (on a breakout above the upper line) or bearish (on a breakout below the lower line). A wedge shape pointing upwards (rising wedge) is used in analyzing an upward price trend within an overall downward price trend. A level wedge is considered a period of consolidation, which will not reverse the current major trend. Finally a wedge pointing downwards (falling wedge) is used to analyze a downward price trend within an overall upward price movement.

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RELATED FAQS
  1. What's a good forex strategy to use when spotting a Wedge-shaped Pattern?

    Use wedge-shaped patterns to identify bullish or bearish price action when trading currencies in the foreign exchange (forex) ... Read Full Answer >>
  2. How effective is creating trade entries after spotting a wedge-shaped pattern?

    Wedge formations are highly effective when trying to identify an entry in a trade or trying to establish sentiment in a stock ... Read Full Answer >>
  3. What is a common strategy traders implement when using the Triple Exponential Average ...

    A trader can use the triple exponential average (TRIX) to identify direction of momentum and potential reversals of trends. ... Read Full Answer >>
  4. How effective is creating trade entries after spotting a Wolfe Wave pattern?

    A Wolfe wave pattern is a variation of a wedge. The bullish Wolfe wave is a variation of a falling wedge, and the bearish ... Read Full Answer >>
  5. How do I build a profitable strategy when spotting wedge-shaped patterns?

    Wedge chart patterns are very important tools that signal reversals of trend in a stock. The wedge pattern is usually a long-term ... Read Full Answer >>
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    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>

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