Guys, I want to share one of my favorite features in technical analysis — the ascending wedge. Many times this pattern has saved my portfolio when I saw a potential reversal at the top of a trend.

The main idea is simple: the price is rising, but the upward and downward movements are getting closer to each other. The upper and lower trend lines converge like two sides of a wedge. It sounds boring, but it’s actually a signal of weakening momentum. When the price breaks below the lower boundary of this pattern — that’s when the interesting part begins.

What attracts me to it? The ascending wedge works in two scenarios. First — a reversal at the end of an uptrend. Second — a consolidation phase before continuing the decline in a downtrend. In both cases, a bearish breakout provides a good entry point for a short.

How do I spot it in practice? First, I need to make sure it’s an ascending wedge. I look for at least two higher highs connected by the upper line, and at least two higher lows connected by the lower line. It’s critical that these lines actually converge. If the lower line is steeper than the upper — even better.

Volume plays a key role here. As the pattern develops, volume usually decreases. This tells me that buyers are losing interest. When a breakout occurs below the support line — I wait for a volume spike. If the breakout happens without volume, it could be a trap.

I never enter before a confirmed breakout. I wait for the candle to close below the support line. Only then do I open a short position. This reduces the risk of false signals, which are quite common.

For target levels, I take the height of the wedge at its start — the vertical distance between the upper and lower lines. Then I project this distance downward from the breakout point. I place the stop-loss slightly above the last high inside the pattern or above the upper trend line.

I use several strategies. For reversals, I look for an ascending wedge at the end of a long uptrend, wait for a breakout, and check RSI for overbought conditions. For continuation in a downtrend, an ascending wedge is just a pause before further decline. There’s also a third option: retesting. After the breakout, the price may return to the lower line (now resistance) and bounce down.

Indicators help confirm the signal. RSI often shows bearish divergence — the price is rising, but RSI isn’t. MACD gives a bearish crossover near the breakout. If the price is below the 50-EMA, it adds confidence in bearish sentiment.

Main mistakes I avoid: entering too early, ignoring volume, always using a stop-loss, and not trying to trade every converging pattern. Not all of them are valid ascending wedges.

Patience and discipline are what work. Wait for confirmation, check indicators, manage risk. The ascending wedge isn’t a holy grail, but if used correctly, it offers good opportunities for profitable trades.