Wedge pattern

A converging chart pattern identified by drawing one line across a sequence of swing highs and another across a sequence of swing lows, where both lines tilt in the same direction and the gap between them narrows. A rising wedge has both lines pointing up, with the lower one steeper, so the lows are gaining ground faster than the highs. A falling wedge has both pointing down, with the upper one steeper. The name describes the picture on the chart and nothing more.

The shape is what separates it from its neighbours, and the distinction is worth holding because the three are constantly confused. A triangle converges with one boundary flat or with the two sloping against each other. A pennant is a small converging shape that follows a steep move and is read as a pause within it. A wedge converges with both boundaries leaning the same way, which is why it can form in the middle of a move or at the end of one. The conventional reading is unusual among named shapes in that it does not depend on what came before: a rising wedge is conventionally described as the weaker structure and a falling wedge as the stronger one, whichever direction the market arrived from. That is a convention repeated across the technical literature, not a measured property of markets.

Identification is manual, and every difficulty that attaches to drawn shapes attaches here. Which highs and lows are connected, on which time frame, and whether the lines are drawn through closing prices or intraday extremes are all left to the reader, so two chartists can produce a wedge and a channel from the same window and both be defensible. The shape is also named once it has finished: while it is forming, a narrowing range is simply a narrowing range, and it is consistent with several shapes and with none. Published tests of wedge reliability disagree with one another, largely because each encodes different drawing rules, and the practical convention is to read a wedge as a description of a contracting range rather than as a statement about what follows it.