Falling wedge

Formation rules

• Two converging downward-sloping trendlines
• Upper trendline steeper than lower
• Volume contracts inside, expands on breakout
• Confirmation: close above upper trendline

How to trade it

Buy on confirmed breakout above the upper trendline. Stop below the wedge's most recent low. Measured target = wedge's widest height projected above the breakout. Falling wedges that form within a primary uptrend (as a continuation) have a higher edge than those forming in primary downtrends.

Common pitfalls

• Without volume confirmation, breakouts fail at high rates
• Strong primary downtrends may push through the wedge

Statistical context

Bulkowski: falling wedges break out upward ~68% of the time with volume confirmation.

Related patterns

• Rising wedge
• Inverse head and shoulders