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Bullish Patterns
Symmetrical Triangles
Ascending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Bottom
Cup & Handle
Trendlines

Neutral Patterns
Symmetrical Triangles
Rectangles

Bearish Patterns
Symmetrical Triangles
Descending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Top
Trendlines

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Wedges

Bearish wedges are small continuation patterns that represent brief pauses within an already existing downtrend. They are characterized by converging trendlines and have a definite bearish bias. They are similar to bearish pennants except where pennants are generally flat, Wedges have a definite slant against the overall overall trend.

Bearish Wedges appear in the middle of a large fall or immediately after a stock has broken down from a substantial rally.

Downside breaks do not have the same volume requirement as their bullish counterparts. Like other bearish breaks, there often is a delayed volume surge.

The price action prior to a wedge formation can be used as a guide in predicting the price movement upon breakdown. If the move into the pattern was quick and full of energy, one can expect that same trading activity when support is taken out. But if the stock slowly meanders its way into the pattern, do not expect big fireworks on a breakdown.

The expected price movement upon breakout is approximately equal to the distance of the move into the pattern.




CPRT is a good example of a stock that traded into a upward sloping bearish wedge while being in a pretty ugly downtrend. Notice how volume dropped off while the stock traded up within the pattern. That's a dead give-away that lower prices will follow.



SGR got crushed in the early months of 2003 and then slowly traded into a bearish wedge pattern. Unlike a bearish rectangle which has parallel trendlines and offers no clues as to when the stock may break down, the converging trendlines with a wedge pattern at least narrow the breakdown day to within a few weeks. Notice, like many bearish pattern, volume surged well after the break.



Do you see the blue line on the volume chart slope down during the time the pattern was forming? Average volume was declining as the stock was moving up, and this increases the bearishness of the formation. Once support is broke, each of the lows within the pattern could potentially act as support, so watch for bounces in those areas.


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