Wedge patterns are formations where both trendlines converge but both slope in the same direction — either both upward (Rising Wedge) or both downward (Falling Wedge). Their counterintuitive nature makes them powerful: a Rising Wedge is bearish and a Falling Wedge is bullish.

Rising and Falling Wedge Diagrams

Rising Wedge (Bearish) Both lines slope UP → Breaks DOWN Falling Wedge (Bullish) Both lines slope DOWN → Breaks UP

Why Rising Wedge is Bearish

Although price is making higher highs and higher lows (looks bullish), the highs are not rising as fast as the lows. Buying pressure is weakening. The wedge narrows because sellers are becoming increasingly aggressive with each rally attempt — until buying dries up completely and price collapses.

Why Falling Wedge is Bullish

Price makes lower highs and lower lows (looks bearish), but the lows are not falling as fast as the highs. Selling pressure is weakening. Buyers are becoming more aggressive with each dip — until selling dries up and price breaks higher.

Trading Wedges

Rising Wedge (Short at breakdown):
Entry: Short when price closes below the lower trendline
Stop Loss: Above the most recent high within the wedge
Target: Start of the wedge (origin point) — full pattern retracement

Falling Wedge (Long at breakout):
Entry: Buy when price closes above the upper trendline
Stop Loss: Below the most recent low within the wedge
Target: Start of the wedge origin point
Falling Wedges on NSE stocks after a sector-wide selloff are excellent buying opportunities. When a fundamentally strong stock forms a Falling Wedge after a 25–40% correction, the wedge breakout often delivers returns of 30–50% as the stock recovers its losses.