The Wedge Formation: Times to Accumulate and Times to Distribute Stocks
The Wedge Formation
Rising wedge formations are created when the following conditions take place:
The stock market (or other markets or individual investments) rises in price.
Trendlines drawn that reflect support lines rise at a constant angle.
Trendlines that reflect resistance, where prices turn down, can be drawn at a constant angle as well, but the angle of rise is less than the angle of the support trendline. The result is a converging channel.
Trading volume decreases as the formation develops. This is an important condition because declining volume during uptrends suggests a reduction in buying pressures.
The pattern tells us that although buying pressures are remaining ...
Get Technical Analysis: Power Tools for Active Investors now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
