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1. Basic Stock Chart Analysis – What Is The Wedge ? Transcript
1. Cover Slide
2. Good Day Traders, this is Roger Scott from Market Geeks with another video
tutorial for you today. Before I begin I want to remind you to subscribe to our
video channel and don’t forget to visit MarketGeeks.com for your free swing
trading report.
3. Today I’m going to continue our series about basic stock chart analysis; more
specifically I’m going to go through a great chart pattern that works with trending
markets that are temporarily pausing, before continuing the trend. The pattern is
called the wedge and although it has a strange sounding name, I can assure you
that it’s one of the best continuation patterns out there. The wedge is often times
seen after a strong trend move in one particular direction. The pattern is found is
stocks, futures, commodities and currency markets and can be traded using daily
time frame or intra-day.
4. Often times ascending and descending wedge patterns are confused with the
triangle pattern. Although both patterns are very similar, there is one primary
difference between the two. The ascending triangle has a flat upper resistance
area and the descending triangle has a flat lower support area, while both
support and resistance areas on the ascending wedge and the descending
wedge are angled towards each other as the wedge pattern progresses. This is
the primary difference between the two chart patterns. You can see in this
example how different both patterns look when you put them next to each other.
5. The most important thing you need to know about the Wedge pattern is how to
identify it correctly and under what market environment does the pattern provide
the maximum chance of success. The first thing you need to know about the
wedge pattern is the fact that it’s a continuation pattern. This is very important to
know and understand because many books and trading resources will tell you
that it can be a reversal pattern as well. In this particular example you can see
how the Falling Wedge Pattern sets up. Notice how the stock is trending strongly
before the consolidation begins. Remember, the longer the consolidation pattern
the better the trade.
6. Once you find a strong trending market that’s temporarily pausing, you want to
make sure the Falling Wedge develops properly. The Wedge can take anywhere
from 2 weeks to 4 months to develop correctly. Always look at the previous trend
to get a good idea of the length of the Wedge. For example if the trend prior to
the Wedge lasted over the course of one year or longer a Wedge taking several
months to complete is not uncommon. If the trend only lasted a few short months
then the Wedge should only take a few weeks to develop.
7. You can see once again how the length of the trend has a substantial factor in
how long the Wedge develops. In this example the stock was moving up for

2. about 1 year prior to enter a consolidation pattern. You should expect a good two
to three months for the full Wedge to complete. The longer the consolidation or
the Wedge pattern takes the better the odds of a strong trend in your desired
direction.
8. You should wait for the stock to completely breakout of the Wedge prior to entry.
You can see in this example how we completely wait for the Wedge to trade
above the upper resistance area before entry. The stronger the breakout the
better the chance of a meaningful move straight up.
9. Thus far we covered the Falling Wedge which is a common consolidation pattern
in a rising market. The Rising Wedge is a consolidation pattern that forms in a
strong down trending market. Both patterns are similar with one exception, the
Rising Wedge takes less time to form than the Falling Wedge. This is not an
absolute rule but something many professional traders have noticed over the
years. In this example you can see how a good downtrend is essential before the
formation of a Rising Wedge.
10.In this example you can see how the stock breaks down after trading in a rising
consolidation for three straight months. Remember that Rising Wedges may
have a bit more volatility and may last a bit shorter than the Falling Wedge.
Breakdowns that are accompanied by gaps are especially promising candidates.
Markets that breakdown strongly have the best chance for continued momentum.
11.Make sure you understand the difference between the Wedge Pattern and the
Triangle Pattern. Keep in mind that Wedge Patterns can take anywhere from two
weeks to 3 months to develop and this is largely dependent on how long the
trend lasted prior to the development of the Wedge. Also remember that Rising
Wedges tend to be more volatile and last a bit shorter than Falling Wedges.
12.Before I finish this tutorial I want to show you one last example of a small startup
company that may be at the last stage of a Rising Wedge as we speak. I offer no
promises and no guarantees but don’t be surprised to see a breakdown in the
coming weeks ahead. No it’s not a start up, its Microsoft one of the biggest
companies in the world.
13.Thanks for joining us for today’s tutorial. Next time I will cover how to measure
your profit target and where to place your stop level when trading Wedge
Patterns. Don’t forget to subscribe to our video channel and please visit
marketgeeks.com for your free swing trading report. This is Roger Scott wishing
you the best in your trading.
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