As a follow-up on my last post about the potential weekly chart bearish rising wedge in Goldman Sachs, I wanted to flesh out the seemingly counter-intuitive rising wedge chart pattern.
The bearish rising wedge is a chart pattern that starts out with price in a wide range which soon contracts in terms of the swings as prices move higher. You are looking for at least two “reactions” or touches of the resistance trendline above, and usually three reactions of the support trendline below to help give the pattern the look of a wedge.
This theory behind the pattern is often difficult to grasp, in the sense that it is tough to call a pattern of higher highs and higher lows bearish. Moreover, the bearish rising wedge pattern is often a trap that eager bears fall into, as their yearning to call a major top sees them aggressively shorting an assumed breakdown (which often does not come to fruition) while price still works through an overall uptrend.
To defend against those kinds of blunders, consider that, as with all potential reversal patterns and candlesticks, overall chart context and maintaing trading discipline are key. The bearish rising wedge is most valid after a prior, established uptrend. The psychology of the pattern denotes that buyers are slowly losing their grip on the market as the price range narrows.
Of course, confirmation to the pattern in the form of a powerful breach and hold below the support trendline gives bears the best shot at actually capitalizing on the reversal, since otherwise the pattern can certainly either morph into another chart formation or prove to be a trap that eventually sees prices going much higher.
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I know it’s not really Jessie because he didn’t say “Yeah Bitch!”
LoL