Broadening Ascending Wedge
This pattern most often appears on the bull market. It is short-term reversal pattern. Most of the times breakout is downward. This price formation looks like megaphone with two trend lines – top and bottom. You can call pattern valid if it has at list three touches of top and three touches of bottom trend-line. In most cases, narrow patterns perform better than wide ones. Price trend leading to the pattern can be up or down. In case of downtrend leading to this price formation, broadening ascending wedge acts as a continuation pattern. Target for Take-Profit should be the level of first price touch of wedge’s bottom trend-line.
Broadening ascending wedge – Example
Here we have a fantastic example of broadening ascending wedge. Chart shows GBPUSD on the 1H timeframe. Price forming megaphone like shape with two sloping upwards trend-lines. Top and bottom lines are widening while price making higher highs and higher lows. Notice that we have 3 touches of top line and 3 touches of bottom line before price breakout wedge and drops.
Broadening ascending wedge – Example 2
In this example we can observe broadening ascending wedge on USDJPY chart. We marked points where price touching trendline of wedge. This is important, as fully developed pattern gives us opportunity for bigger profit. Here we see price drop of over 700 pips which is extraordinary. Please notice price stopping at the target level. Sometimes at this level price reversing and pulling back to wedge’s trendline, but usually drops further like in this example. We always recommend placing exit order at the target level.