What is Falling Wedge Pattern?

The Falling Wedge pattern is a bullish continuation pattern in technical analysis that signals a potential trend continuation from a downtrend to an uptrend. It is identified by a series of lower highs and lower lows, forming a wedge-like pattern that slopes downward. The pattern takes time to form and can take several weeks or months.

The Falling Wedge pattern is typically characterized by two downward-sloping trendlines, with the upper trendline acting as resistance and the lower trendline acting as support. As the price continues to decline, the distance between the two trendlines narrows, indicating that the selling pressure is weakening and the buyers are gaining strength.

Traders typically look for a confirmation of the pattern when the price breaks through the upper trendline on higher-than-average trading volume. This breakout is usually followed by an uptrend continuation, with traders setting a price target based on the height of the pattern.

It is important to note that not all Falling Wedge patterns will result in a trend continuation, and traders should use caution and consider other technical indicators and market factors before making any trading decisions based solely on this pattern.