A descending wedge is a technical analysis pattern that indicates a potential price reversal or continuation. Also known as a falling wedge, it’s a bullish pattern that occurs when the price makes multiple swings to new, narrower lows, suggesting an upcoming reversal of a preceding downtrend. It also may be a continuation pattern, sloping down against the prevailing uptrend and implying that the uptrend will continue after a brief period of consolidation or pullback.
A descending wedge pattern forms when the market becomes centred between two intertwined resistance and support lines. A breakout above the upper trendline, often with increased volume, marks the pattern’s completion. Traders may use the wedge’s width to estimate a potential price target for the breakout.
