Wedge

In a technical analysis, the term wedge is used to define a security pattern where trend lines are drawn above and price chart converges below into an arrow shape. It is similar to a triangle, except that in a triangle, the trends move in opposite direction where the top decrease and the bottom increase. In a wedge, both lines represent the same trend, but have different slopes leading to a convergence. Such patterns help technical analysts to analyze a short to intermediate term reversal of what the analyst feels to be the major price trend. The price is expected to return to the major trend once it breaks out of the wedge. A breakthrough of the wedge pattern is seen by technical analysts either as bullish or bearish. A wedge pointing upwards represents an upward price trend and a level wedge represents a period of consolidation that will not reverse the current major trend. A wedge pointing downwards analyzes a downward price trend within an overall upward price movement.

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Edited and Updated 31st May 2014

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