A lot of investors usually look for patterns when trading so as to determine the best decision to make. What does this mean for investors? There are patterns considered as bullish continuation patterns because they indicate that the stock price has risen above its previous high and is now moving higher. It usually lasts for several weeks or months before breaking down. This helps investors and traders in making their decisions.

A rising wedge pattern is a bullish continuation pattern that occurs after a long period of sideways trading. It also often signals strong upward momentum for stocks. If you see one forming, it might signal that the current trend will continue to move upwards. In other words: if you see a rising wedge, then everything looks great! However, they can also indicate that the market is starting to pull back. So, if the movement in a stock’s price continues in an upward direction but has not yet broken through resistance levels, consider yourself warned! It may be time to sell your shares and get out while they are still cheap.

The bottom line on the pattern is simple: in itself, it is no guarantee that you should buy the stock; however, once it breaks through support, it certainly gives reason for further optimism. But keep in mind that it is important to stick with long-term strategies when analyzing charts. If you have short-term plans involving buying at resistance, then don’t go too far off course.

How Do I Identify a Rising Wedge Pattern?

You can identify it by looking at the blue dotted lines. These lines represent the highs and lows each week since the last time prices rose above their previous lows. When a new low is drawn along with the next highest point, we have seen a break from the downtrend formed by these parallel lines.

With that said, here’s how to spot one:

Find the latest low (located just beneath where the solid red line intersects the green line).

Draw a horizontal line from that low to the highest point reached.

Now, draw another vertical line to the next highest point from that point.

Next, trace that line until it meets the horizontal line again.

When that happens, it means that there has been a breakout from the downtrend established by the two lines.

Continue tracing the line until it reaches its highest point before finding new highs.

That is what makes it. Once that line gets close enough to the top of the box surrounding the chart, it is a good indication that a reversal is likely to occur.

On the flip side, if you find it and continue seeing lower lows as well as lower highs, you know that other hand, if the line doesn’t reach the top of the chart, you know that the uptrend isn’t entirely over yet. You’ll need to wait a little longer for any significant change.

How Can I Use This Trend to Trade?

If you see a rise in volume with a breakout of a rising pattern, you should trade based on the strength of the pattern rather than its mere existence. This pattern is a very reliable indicator, so if you’ve identified one, it could mean that the trend will continue for some time.

Additionally, most traders want to use the pattern as an early warning sign, meaning that they would like to make a preemptive strike using the same charting patterns used earlier. For example, if you’re trading stocks, if you notice this phenomenon in Google’s stock price, then you’d want to open a position when the stock is below $900.

Now, these patterns typically form about eight weeks after formation, so you won’t always see them right away. As such, traders who wish to trade against this pattern must look to technical analysis techniques such as Fibonacci retracement and moving averages as a guide.

Also, be sure to pay attention to stocks that have recently formed or are in the process of forming a rising pattern. They are usually more volatile than those that haven’t even begun moving towards a higher equilibrium.

When Should You Be Watching the Market?

There are times during which these patterns don’t appear because many market players believe that a downturn has already occurred. Others feel that no changes have taken place. However, after the fact, they realize that things were different after all.

With this being the case, now is not the best time for investors to watch the market. If you think that the trend will change, then maybe you shouldn’t even watch it. Instead, try focusing your energy on making money from other investment vehicles.

Another reason you may not want to get involved in the markets is that it might cause you to lose money. Many people fall victim to psychological factors when investing. This means they often lose perspective and allow emotion to dictate their decisions.

While it can help you predict the next market stage, it also indicates a lot of volatility shortly. Thus, consider the trends when deciding whether or not to put your money into the market. At least try to identify patterns that aren’t directly related to financial instruments.