![]() ![]() Momentum traders follow the initial impulse further pushing prices up.Ĭontrarian traders judge the price to be trading above its intrinsic value, selling and thus creating a decline in prices. The cause of an ascending broadening wedge is a surge from an initial buying impulse, driving the price higher. Selling directly after a partial decline would allow for higher profits.Ĭertain analysts close trades caused by partial rises/declines when the price reaches the support/resistance of the wedge, opening a new position in the case of a breakout while using the metric rule for setting their take profit.īulkowski offers a description of the causes of broadening wedges in the market in terms of the market participant’s behavior. Selling directly after a partial rise would allow for higher profits.įor a broadening descending wedge the measure rule would place our take profit at the highest high inside the formation. The measure rule for broadening wedges allows us to determine the position of a take-profit/stop-loss.įor a broadening ascending wedge the measure rule would place our take profit at the lowest low inside the formation. Partial rises and declines can offer a better price to buy/sell instead of waiting for a breakout. Note that a partial decline always starts from the test of the resistance. The price bounces off the resistance, moves towards the support without reaching it, and then goes back to the resistance where we can expect a potential breakout upwards. ![]() ![]() Partial declines commonly occur in broadening descending wedges. Note that a partial rise always starts from the test of the support. We can expect a potential downward breakout after that. Partial rises commonly occur in broadening ascending wedges, price bounces off the support, moves towards the resistance without reaching it, and go back to the support. Partial rises/declines often indicate the direction of a breakout. Partial rises/declines are phenomena described by Bulkowski in broadening formations and are described as being common. Upward breakouts are often followed by an increase in price. Additionally, the support should be steeper than the resistance.ĭescending broadening wedges have a bullish bias with breakouts mostly occurring upward. Similarly to ascending broadening wedges, Bulkowski suggests the price needs to test the support and resistance three times each. The slope of both the support & the resistance should be significantly different from 0. Downward breakouts are often followed by a decrease in price.ĭescending broadening wedges mostly occur during downtrends with declining local maxima (lower highs) forming a downward sloping resistance and declining local minimas (lower lows) forming a downward slopping support. ![]() Volume tends to increase during the formation of such pattern.Īscending broadening wedges have a bearish bias with breakouts mostly occurring downward. Additionally, the resistance should be steeper than the support. The slope of both the support & the resistance should be significantly different from 0.īulkowski suggests the price needs to test the support and resistance three times each. Īscending broadening wedges mostly occur during uptrends with rising local minimas (higher highs) forming an upward sloping resistance and raising local minimal (higher lows) forming an upward slopping support. While they all have a broadening characteristic they can have different identification rulesīroadening wedges are classified depending on the direction of the support/resistance. As such the apex of the support/resistance in a broadening wedge is located to the left.īroadening wedges must not be confused with other broadening formations. We also review the literature in order to find their deterministic cause.īroadening wedges are characterized by price variations laying within one support and resistance, both having the same direction and broadening over time. We provide a description of each pattern and its implications. In this post, we perform an advanced analysis of broadening wedges patterns. ![]()
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