![]() ![]() This will help you get in the market at the right time and avoid getting caught in bull and bear traps. If you see a widening formation on a chart, I would recommend you wait for a confirmed price action before making your trading decisions. Volume levels will then rise significantly upon a breakout (either upward or downward). If the trading volume increases along with the price, this indicates that the momentum is still strong and the previous price trend is likely to continue. This is a warning sign that the buyers are losing interest and that the trend is going to reverse. The formation is only considered valid if the volume levels are decreasing as the price moves higher. When trading this pattern, it is also important to keep an eye on the volume levels. However, you will need to stay flexible until the formation fully develops. ![]() The great thing about the widening wedge pattern is that it can be both bullish and bearish, regardless of the time frame. Is Broadening Wedge Pattern Bullish or Bearish? If you are a more experienced trader, it can help you time your entry and exit points. If you are just starting out, you can use this pattern to help you identify potential reversal trading opportunities. No matter what your level of experience, the expanding wedge can be a valuable tool in your trading arsenal. If you're bearish, you can wait for a downward breakout to occur before taking your short position. If you are bullish on the security, you can go long when there's an upward breakout and the price closes above the upper trendline. However, breakouts can occur in either direction, so you need to be prepared for both scenarios. The trend is usually sideways within the expanding wedge pattern. The formation is considered complete when the price breaks outside the megaphone shape. ![]() It is created by drawing two diverging trend lines that connect a series of price peaks and troughs. Whereas the wedges are either ascending or descending.The broadening wedge is a bilateral chart pattern that you can use to spot potential breakouts (if the market is trending) and short-term trend reversals. The main difference between pennants and wedge patterns is pennants are sideways and horizontal. They look like triangles but they are smaller. Pennants and wedges as both continuation patterns. The price target for pennants is set by measuring the initial flagpole’s height to the point at which the price breaks out from the pennant. The stop-loss level is set at the lowest point of the pennant pattern. We can see the formation of Pennants Pattern in the hourly chart of Pfizer Ltd.Īfter an uptrend, the prices moved in the consolidation phase forming a pennant and the prices continue to move in an uptrend after the breakout. The prices should move in the prior direction after the breakout.The volume should increase in the initial move of this pattern formation followed by the weakening of the volume and then increase in the volume at the breakout.After a strong movement either uptrend or downtrend, the prices should move in a consolidation phase.When trading with the Pennants pattern, the following points need to be noted: Here is the formation of the pennant chart pattern: Trading with Pennants Pattern: Bearish Pennants:Ī bearish pennants pattern is formed after a sharp fall in the prices of the stock.Īfter a long downtrend, traders try to close their sell position with the assumption that reversal is going to come.īut at the same time, new sellers start the shoals selling the stock which results in the breakout of the prices in the same direction as the prior downtrend. Learn to Identify Trend Reversals with Candlesticks in just 2 hours by Market Experts 2. The prices began to consolidate as the traders start exiting the stock.īut at the same time, new buyers start buying the stock which results in the breakout of the prices in the same direction as the prior uptrend. Bullish Pennants:Ī bullish pennants pattern is formed after a sharp rise in the prices of the stock.Īfter a long uptrend, traders try to close their position with the assumption that reversal is going to come. The breakout of the prices is usually accompanied by an increase in the volume. When identifying a consolidation phase traders should look for two converging lines.Īfter the consolidation phase, the breakout of the prices takes place in the same direction as the prior trend. This indicates a sharp movement in the prices. The large movement in the prices is known as the flagpole. ![]()
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