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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30 years of stock market experience and widely regarded as a leading expert on chart patterns. His books, including the best selling Encyclopedia of Chart Patterns, have been translated into many languages. He may be reached at

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Bulkowski's Rising Wedge

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Industrials (^DJI):
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Nasdaq (^IXIC):
S&P 500 (^GSPC):
As of 06/18/2013
15,318 138.38 0.9%
6,359 61.35 1.0%
491 3.01 0.6%
3,482 30.05 0.9%
1,652 12.77 0.8%
YTD
16.9%
19.8%
8.3%
15.3%
15.8%
Tom's Targets    Overview: 06/18/2013
15,700 or 14,700 by 07/01/2013
6,000 or 6,600 by 07/01/2013
500 or 470 by 07/01/2013
3,650 or 3,300 by 07/01/2013
1,750 or 1,550 by 07/01/2013

Written by and copyright © 2005-2013 by Thomas N. Bulkowski. All rights reserved.

For more information on this pattern, read Encyclopedia of Chart Patterns, Second Edition, pictured on the right, pages 811 to 826. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.

Rising wedges, especially for downward breakouts, are some of the worst performing chart patterns. Downward breakouts have unacceptably high failure rates and small post breakout declines. Also, pullbacks occur almost two-thirds of the time and throwbacks happen almost three-quarters of the time.

Rising wedge chart pattern
Rising Wedge Chart Pattern

 

Rising Wedge Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 18 out of 23; 20 out of 21
Break even failure rate for up/down breakouts: 8%; 24%
Average rise/decline: 28%; 14%
Throwback/pullback rate: 73%, 63%
Percentage meeting price target for up/down breakouts: 58%, 46%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Rising Wedge Identification Guidelines

CharacteristicDiscussion
Price trendCan be any direction leading to the pattern.
ShapeA narrowing and rising triangle shape.
TrendlinesPrice bounces between two up-sloping and converging trendlines.
TouchesPrice should touch each trendline at least five times to outline a good pattern. That's 3 touches of one trendline and 2 of the opposite.
Duration3 weeks is the minimum duration, otherwise it's a pennant.
Volume trendTrends downward at least 74% of the time until the breakout.
BreakoutCan be in any direction but is downward 69% of the time.
ConfirmationThe pattern confirms as a valid one when price closes outside one of the trendlines.

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Rising Wedge Trading Tips

Trading TacticExplanation
Measure ruleFor downward breakouts, the lowest valley in the pattern (A) is the price target. Alternatively, compute the height from the highest peak (B) to the lowest valley (A) and then multiply it by the above “percentage meeting price target.” Add it to (upward breakouts) or subtract it from (downward breakouts) the breakout price (the point at which price crosses the trendline, shown in the Measure Rule figure to the right as a blue line for this downward breakout) to get a price target (C).
BreakoutThe average distance to the breakout is 58% to 64% of the way to the triangle apex (where the trendlines join).
ConfirmationWait for a close outside one of the trendlines before taking a position.
Throwbacks and pullbacksThrowbacks and pullbacks hurt performance.
WeaknessUpward breakouts may show weakness two weeks after the breakout.
WidthWide patterns perform better than narrow ones.
Rising wedge measure rule
The Measure Rule

Rising Wedge Example

Rising wedge chart pattern example

The above figure shows an example of a rising wedge chart pattern. Each trendline has at least three distinct minor high or minor low touches, sandwiched between two converging trendlines. The upward breakout from this rising wedge is unusual because of its rarity. A throwback follows the breakout in this example.

-- Thomas Bulkowski

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Other Rising Wedge Examples

See Also

Copyright © 2005-2013 by Thomas N. Bulkowski. All rights reserved. If opportunity doesn't knock, build a door. -- Milton Berle.