what is a wedge 
a wedge is a price pattern marked by converging trend lines on a price chart the two trend lines are drawn to connect the respective highs and lows of a price series over the course of 10 to 50 periods the lines show that the highs and the lows are either rising or falling at differing rates giving the appearance of a wedge as the lines approach a convergence technical analysts consider wedge shaped trend lines useful indicators of a potential reversal in price action understanding a wedgea wedge pattern can signal either bullish or bearish price reversals in either case this pattern holds three common characteristics first the converging trend lines second a pattern of declining volume as the price progresses through the pattern third a breakout from one of the trend lines the two forms of the wedge pattern are a rising wedge which signals a bearish reversal and a falling wedge which signals a bullish reversal this usually occurs when a security s price has been rising over time but it can also occur in the midst of a downward trend as well the trend lines drawn above and below the price chart pattern can converge to help a trader or analyst anticipate a breakout reversal while price can be out of either trend line wedge patterns have a tendency to break in the opposite direction from the trend lines therefore rising wedge patterns indicate the more likely potential of falling prices after a breakout of the lower trend line traders can make bearish trades after the breakout by selling the security short or using derivatives such as futures or options depending on the security being charted these trades seek to profit from the potential for prices to fall 