Today's Knowledge
Dealer Layout Pattern - Wedge
The wedge pattern is similar to the flag pattern, both belonging to short-term adjustment patterns. In terms of shape, both patterns resemble flags hanging on a flagpole, with the flag pattern being a parallelogram, while the wedge has two necklines that will intersect in the short term, forming an elongated triangle, resembling a triangular flag.
Wedge patterns often appear during upward or downward trends because, regardless of a strong upward trend or a sharp downward trend, prices cannot continuously rise or fall; there will always be a period of consolidation. During this consolidation phase, the K-line trend often shows a wedge pattern. The wedge pattern can also be described as a refueling station for bulls or bears, generally not lasting long; once refueled, prices will start again. Wedge trends can typically be divided into ascending wedges and descending wedges.
Characteristics of Ascending Wedge:
1. Formed by the intersection of an upward-sloping resistance line and an upward-sloping support line;
2. The angle of the support line is steeper than that of the resistance line, with the lows rising faster than the highs;
3. Appearing in an upward trend, it signals a reversal; when appearing in a downward trend, it signals a correction.
The characteristics of the descending wedge are the opposite of the ascending wedge. However, after breaking the resistance line, the descending wedge will not change as quickly as the ascending wedge; its price curve will mostly form a rounded bottom and then rise slowly.
What operational strategies do investors have when encountering wedge consolidation patterns?
Operational Strategy for Ascending Wedge: When the price breaks below the lower line of the ascending wedge, investors should immediately liquidate their positions.