Descending Wedge
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A descending wedge is a bullish chart pattern in technical analysis that forms as price action contracts between two downward-sloping trendlines. Unlike the descending triangle, it signals a potential reversal to the upside.
How It Develops
The descending wedge occurs when both highs and lows trend downward, but the rate of decline in the lows is slower. This narrowing pattern shows weakening selling pressure, often followed by a breakout above the upper trendline.
Why Traders Watch It
Traders view the descending wedge as a sign of possible bullish reversal or continuation, especially if confirmed with rising volume. It can be a valuable indicator in spotting trend changes early.