Below is a slider quiz to test your ability to identify rising wedges and trade them. Captions appear below the pictures in red for guidance, so be sure to scroll down far enough to read them.
1 / 6
A rising wedge is a bitch to find. However, I'll make it easy in these charts because I've outlined some of them. Take this chart, for example. The rising wedge fits
between the wedge shaped lines, AEB. The pattern sees price bounce from red trendline to trendline plenty of times, limiting the white space between the two red lines. The two trendlines
should rise and merge at the apex. Often, directly below the apex you'll see price change trend. That happens in this case at D (directly below apex E. This turn is a lasting one, but often
they are not). The measure rule, which suggests, but not guarantees how far price might move after the breakout, I show as a green line at B. In other words, the price target is the bottom
of the green line. That's how far you can expect price to drop (not always, of course). Volume is flat in this example (C), but typically trends downward 79% of the time until the breakout.
The rising wedge is outlined in red at A and the diamond bottom is at B, in green, with the broadening bottom shown in brown at C. The red and green colors remind me of
Christmas. Yes, the diamond looks weird but they do most of the time.
The rising wedge is at A (red) and the double top is at BC (which confirms when price closes below green line 2). The breakout is downward at A. How far will price move?
Pick one of the lines. Line 0 means it's off the chart upward, and 6 means it's off the chart, downward. Pretend line 6 is green, too.
6 / 6
This is one of those weird cases where price breaks out downward (A), reverses direction, and flies out the top, never to be seen again. Price peaks sometime in 2007, as
I recall. Line 0 is the correct answer.