An ascending wedge is one of the most easily misinterpreted patterns in technical analysis. Many beginners see the price moving between two upward converging trendlines and automatically interpret it as a bullish signal, often falling into traps. In fact, this pattern most often indicates a potential trend reversal—especially when it appears at the end of an uptrend.
The true nature of the ascending wedge
An ascending wedge consists of two upward-sloping, gradually converging trendlines. The support line is formed by connecting a series of higher lows, while the resistance line connects a series of higher highs. Sounds contradictory, right? It is this characteristic that reveals the market's true state: although the price is making new highs, each rebound appears weaker, indicating that the bullish momentum is waning.
As the pattern develops, trading volume typically shows a declining trend, reflecting decreasing market participation and traders' hesitation. Until the price breaks through the pattern...