Uptrend & Downtrend Bullish Falling Wedge Pattern Tutorial

A bullish falling wedge is a charting pattern that signals a potential reversal from a downtrend to an uptrend. Here's a breakdown of its key characteristics:

Shape: The pattern forms a wedge that slopes downward, with the upper trendline connecting the highs and the lower trendline connecting the lows. The key is that the highs and lows get closer together as the pattern develops.

Trend: It typically forms during a downtrend, indicating that selling pressure is decreasing.

Breakout: The pattern is bullish when the price breaks above the upper trendline. This breakout suggests that the downward trend is losing momentum, and an upward trend may follow.

Volume: During the falling wedge formation, volume tends to decrease, which supports the idea that selling pressure is diminishing.

Retest: After the breakout, it's common for the price to retest the upper trendline, and if it holds, it provides further confirmation of the bullish reversal.

Example
Imagine a stock that has been falling for several months. The price forms lower highs and lower lows, creating a narrowing wedge. Suddenly, the price breaks above the upper trendline with increased volume, signaling a potential reversal and the start of an upward trend.