January 2012
Intermediate to advanced
624 pages
17h 49m
English
Chapter 18
Wedge and Other Three-Push Pullbacks
When a pullback forms in a bull trend, it is a bull flag, and when it occurs in a bear trend, it is a bear flag. It is often contained between a converging trend line and trend channel line. When this is the case and it is horizontal, it is a triangle, which can break out in either direction. However, when it is falling in a bull trend or rising in a bear trend, it is called a wedge, and, like all pullbacks, it will usually break out in the direction of the trend. Like other types of triangles, it has at least five legs, but unlike a typical triangle, the second leg often exceeds the prior swing point. It can be just a simple three-push wedge pattern or a channel after a spike. It can also assume an irregular shape that looks nothing like a wedge but has three countertrend pushes, which is all that is needed to qualify as a triangle, or, if it is sloping, a wedge type of triangle, or simply a wedge.
A wedge pullback is a with-trend setup, and traders can enter on the first signal, as soon as the market reverses back into the direction of the trend. Wedges can also be reliable reversal patterns, but unlike a wedge pullback, a wedge reversal is a countertrend setup and it is therefore usually better to wait for a second entry. For example, unless a wedge top is extremely strong, traders should wait for the bear breakout and then assess its strength. If it is strong, they can then look to see if there is a breakout pullback short setup, ...
