A stock wedge is a geometric-shaped representation used to make an achartist analysis. The wedge is shaped like a triangle and you can see the changes that have occurred in the trend of an asset.
Wedges represent trend reversal patterns, unlike trading triangles that represent trend continuation figures.
How to identify a stock wedge
It is important for an analyst to know how to identify a stock market wedge, but the truth is that there is no exact method to know when we are facing one of them or not. The analyst's experience will help us to know when we will and when we will not.
However, what we can see is that these wedges are usually generated at the end of long trends, so you have to have a context when you are going to analyze it. Also, wedges can form in months, years, or even days, depending on how complex or how slow it takes.
Types of stock wedge
The chart patterns allow us to know the trend of the quotation, giving rise to two types of stock market wedges: bullish or bearish.
- Bullish stock market wedge. It usually occurs at the end of trends, indicating that the uptrend is going to end and the price will go down. The expected movement target is usually to the base of the wedge.
- Bearish stock market wedge. On the other hand, the bearish wedge is seen in downtrends, which indicates that the trend may be about to end and an upward price movement is expected. The expected target is usually to the base of the wedge.