Falling Wedge: The Undercover Reversal Signal Every Trader Needs to Spot

Seen those converging trendlines squeezing lower? That’s a falling wedge—and it’s usually a sneaky setup for a bullish breakout.

Here’s the no-BS version:

The Pattern: Two downward trendlines converging, upper slope steeper than lower. Selling pressure fades, breakout incoming.

Why It Works: Volume dries up as the wedge tightens, then spikes on breakout. RSI bullish divergence + MACD crossover = chef’s kiss confirmation.

How to Trade It:

1. Wait for price to break above the upper trendline (don’t FOMO early)
2. Measure wedge height → project upward = profit target
3. Stop-loss just below the wedge floor
4. Enter on confirmed close + volume spike

Pro Tips:

• Aggressive traders buy near the lower trendline (tight stop required)
• After breakout? Watch for retest of that trendline—often a second entry
• False signals happen—always demand volume confirmation, not just price

Real Talk: This works as both reversal (end of downtrend) or continuation (consolidation in uptrend). The difference? Context. Check what led to the wedge.

Common L’s: Entering before breakout, ignoring volume, or forcing trades on weak patterns. Patience > FOMO. That’s literally it.