Wedge

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Trendline

    A line that is drawn over pivot highs or under pivot lows to ...
  2. Triangle

    A technical analysis pattern created by drawing trendlines along ...
  3. Resistance (Resistance Level)

    A chart point or range that caps an increase in the level of ...
  4. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  5. Support (Support Level)

    The price level which, historically, a stock has had difficulty ...
  6. Fintech

    Fintech is a portmanteau of financial technology that describes ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. What's the difference between the coverage ratio and the levered free cash flow to ...

    Coverage ratios focus on a company’s ability to manage its debt, while the levered free cash flow to enterprise value ratio ... Read Full Answer >>
  6. How can I use market capitalization to evaluate a stock?

    Market capitalization represents the market value for an entire company. Investors can compare market cap to financial data ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Triangles: A Short Study In Continuation Patterns

    Learn how to read these formations of horizontal trading patterns.
  2. Charts & Patterns

    Continuation Patterns: In-Depth Look At Triangles

    We take a closer look at ascending and descending triangles to help traders predict the ultimate breakout direction.
  3. Charts & Patterns

    Continuation Patterns: An Introduction

    Those random movements in the charts actually form patterns. Learn the basics of what these patterns are.
  4. Charts & Patterns

    Continuation Patterns - Part 2

    Take a closer look at triangles, which appear in ascending, descending and symmetrical forms.
  5. Active Trading

    Tales From The Trenches: The Rising Wedge Breakdown

    Learn how to short this reversal pattern with a favorable risk/reward ratio.
  6. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  7. Chart Advisor

    Invest in Japan with this ETF

    The Japanese stock market has been front and center in the minds of many international traders over the past few weeks — and for good reason.
  8. Charts & Patterns

    How to Analyze Pharma Stock Fundamentals

    What you need to know about analyzing the fundamentals of pharma stocks.
  9. Chart Advisor

    Bullish Traders Are Turning To Rare Earth Metals

    Companies that explore and or process rare metals are of specific interest to traders because of strong moves in a couple of the sector’s key players.
  10. Chart Advisor

    Long and Short Trades to Consider This Week

    Here are short and long trades to consider, so you have choices no matter which way the market goes.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center