Like the rising wedge, the falling wedge can also send reversal or continuation signals.
When it appears as a reversal signal, it appears at the bottom of a downtrend, suggesting that a new round of uptrend is about to start. When it appears as a continuation signal, it forms during an uptrend, meaning that the price will resume the uptrend. Unlike the rising wedge, the falling wedge is a bullish pattern.
In this case, the falling wedge is acting as a reversal signal. After a period of decline, prices are making lower highs and lower lows. Notice that the slope of the downtrend line connecting the highs is steeper than the slope of the downtrend line connecting the lows.
After breaking through the top resistance of the wedge, the price of the coin has a perfect upward trend, with the increase being approximately equal to the height of the wedge pattern. In this case, the price of the coin has further increased after reaching the upward target.
Let’s look at another example of a falling wedge acting as a continuation signal. As we mentioned before, when a falling wedge pattern forms during an uptrend in a coin’s price, it usually suggests that the uptrend will resume soon.
In this case, the price is consolidating after a strong rally. This could mean that buyers are just taking a breather and may gather more people to join the long side.
If we had placed a stop entry order above the falling trendline connecting the highs of the falling wedge, we might have caught this scenario upside move. A perfect upside target would be equal to the height of the wedge. If you were looking for more profit, you could choose to lock in some profits after the price reaches the target and continue to hold the rest of the position. #ETH
