Falling wedge

What it is

A falling wedge is the mirror of the rising wedge. Price makes lower highs and lower lows, but the trendlines converge: the upper line falls faster than the lower line. Each decline covers less ground. It is generally read as bullish and completes when price closes above the upper line.

Why it forms

The trend is down, but each wave of selling is weaker. Sellers keep pressing, yet buyers absorb the drops sooner. Declining volume often shows that the selling is running out of participants.

When price closes above the upper line, sellers who sold each rally are caught, and their buying back adds to the move.

How to identify it

• Both trendlines slope downward.
• The lines converge — the upper line is steeper than the lower line.
• At least two touches on each line.
• Volume often declining as the wedge narrows.

What confirms it

A candle close above the upper (resistance) line, ideally on rising volume.

What invalidates it

• A decisive close below the lower line.
• The lines diverge instead of converging.

Common mistakes

• Confusing it with a falling channel. Parallel lines are a channel, not a wedge.
• Buying inside the wedge. It can keep falling; the break is the signal.
• Forgetting context. A falling wedge inside a strong downtrend deserves more caution.
• Treating the wedge start as a target. It is a reference level only.