What is Wedge?
Pona (wedge)
In short
A pattern whose two boundary lines slope the SAME way and converge. A rising wedge usually breaks down, a falling wedge up — it shows a trend losing momentum.
Also known as: rising wedge, falling wedge, pona
A wedge is a pattern whose two boundary lines slope the same way and converge. The difference from a triangle: in a triangle one line is flat or the lines point in opposite directions, while in a wedge both point up or both point down.
Two types
- Rising wedge — both highs and lows are rising, but the lows rise faster. Price looks like it's climbing, yet each new high gets only a little further than the last — buyer strength is fading. It usually breaks down.
- Falling wedge — the mirror: highs and lows are falling, but each new low comes in a smaller step. Sellers are tiring; it usually breaks up.
The logic
A wedge is a picture of a trend losing strength. The move continues, but each step gets smaller. It often comes with divergence: price makes a new high, while a momentum indicator such as RSI makes a lower one.
Signal and target
The signal is a close beyond the lower line (rising wedge) or upper line (falling wedge). A common objective is the level where the wedge began. Wedges also appear as continuation patterns: for example, a small falling wedge in an uptrend works much like a flag.
Both lines rise, but the lower one is steeper — every new high comes with a smaller step while volume fades. The lower line broke at $108.8 on volume: an exit signal. The usual target is where the wedge began, $100.
Both lines slope down, but the upper one is steeper — sellers gain less ground each time. The upper line broke at $41.6: entry $42.6, stop below the wedge's last low ($40.7) at $40.3. Target 1 is the last high inside the wedge, $45.2; target 2 is the wedge start, $50.
Example
Illustrative (rising wedge): a stock climbed from $40 to $52 over two months. Highs: $46 → $49 → $52 (+$3 each). Lows: $40 → $44.50 → $48 (+$4.50, then +$3.50). The line of lows is rising faster than the line of highs — the lines are converging.
- Price closes below the lower line at $49.50 — a breakdown.
- Objective: where the wedge began — $40
- Short stop: above the last high, at $52.20. Risk: $52.20 − $49.50 = $2.70
- Distance to objective: $49.50 − $40.00 = $9.50 → R:R ≈ 1:3.5
For a trader who is long, it's a signal to exit or raise the stop.
Mistakes and tips
Don't mistake a rising wedge for a healthy uptrend: price is rising, but the steps are shrinking.
Draw wedge lines through at least two highs and two lows; a third touch on each line makes the pattern more reliable.
Confirm the break with a close and compare the objective with nearby support levels.
Frequently asked questions
- Is a rising wedge bullish or bearish?
- Usually bearish: even though price is rising, the pattern often breaks down because the advance is losing strength.
- How is a wedge different from a triangle?
- In a wedge both lines slope in the same direction. In a triangle one line is flat or the lines slope in opposite directions.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
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