Forex Trend Continuation: The Wedge Pattern

The wedge continuation pattern combines some of the characteristics of the triangle and the pennant formation. It has taken the shape and development time of the triangle continuation pattern. On the other hand, it resembles the behavior and appearance of the pennant, but without a pole.

The wedge continuation pattern has a distinct slope. The price breakout occurs in the opposite direction of the slope of the wedge and yet, in a similar direction as the one of the original trend.

The wedge continuation pattern gives only a direction signal. No reliable price objective can be extracted from this formation.

There are two types of wedges that are based on the direction of the trend:

• falling wedge pattern

  The falling wedge is a bullish pattern. It serves as an indicator that the currency price will break upwards through the wedge and continue its previous uptrend.

• rising wedge pattern

  The rising wedge is a bearish pattern. It indicates that the currency price is headed in a downward direction after the completion of the pattern.

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