The wedge pattern is similar to the flag pattern, both being short-term corrective patterns. Visually, both shapes resemble flags hanging from a flagpole, with the flag pattern being a parallelogram and the wedge having two necklines that intersect in the short term, forming an elongated triangle resembling a triangular flag.
Wedge patterns often appear during upward or downward trends, as prices cannot continuously rise or fall, and there will always be a period of consolidation. During market consolidation, the K-line movement often exhibits wedge patterns. The wedge pattern can be seen as a fueling station for bulls or bears, generally not lasting long; once fueled, the price will start again. Wedge movements can generally be divided into ascending wedges and descending wedges.
Wedges most commonly appear in the middle of existing trends and usually belong to continuation patterns. Wedges can also appear during the top or bottom processes, indicating a trend reversal, but such occurrences are much less common than the former. The wedge pattern consists of two converging trendlines that slope in the opposite direction of the current trend; a descending wedge is typically bullish, while an ascending wedge is usually bearish.
Analysis Points:
(1) Wedges (whether ascending or descending) must have two clearly converging lines at a point; if the formation is too loose, the possibility of forming a wedge should be questioned. Generally, a wedge requires more than two weeks to complete.
(2) Although most descending wedges that occur in a declining market break downwards, if they instead break upwards with a significant increase in volume, the pattern may undergo a transformation, developing into an ascending channel. At this point, we should change our original bearish outlook, as the market may begin a new upward trend along this new ascending channel.
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