Gold Falling Wedge Continuation
The falling wedge continuation will still slope down, but the slope will be against the prevailing uptrend. As a reversal pattern, the falling wedge slopes down and with the prevailing trend. Regardless of the type (reversal or continuation), falling wedges are regarded as bullish patterns.
1. Prior Trend: To qualify as a reversal pattern, there must be a prior trend to reverse. Ideally, the falling wedge will form after an extended downtrend and mark the final low. The pattern usually forms over a 3-6 month period and the preceding downtrend should be at least 3 months old.
2. Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be lower than the previous highs.
3. Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be lower than the previous lows.
4. Contraction: The upper resistance line and lower support line converge to form a cone as the pattern matures. The reaction lows still penetrate the previous lows, but this penetration becomes shallower. Shallower lows indicate a decrease in selling pressure and create a lower support line with less negative slope than the upper resistance line.
5. Resistance Break: Bullish confirmation of the pattern does not come until the resistance line is broken in convincing fashion. It is sometimes prudent to wait for a break above the previous reaction high for further confirmation. Once resistance is broken, there can sometimes be a correction to test the newfound support level.
6. Volume: While volume is not particularly important on rising wedges, it is an essential ingredient to confirm a falling wedge breakout. Without an expansion of volume, the breakout will lack conviction and be vulnerable to failure.
stockcharts.com/help/doku.php?id=chart_school:chart_analysis:chart_patterns:falling_wedge_revers
What I would like to see... Volume and Money to Flow back temporarily in Gold. The idea is to trap the gold bugs into thinking this is a bullish repeat move of 2011. In 2011 the same scenario too place, congress was grappling over the debt ceiling which led to a US credit rating cut.
1. Prior Trend: To qualify as a reversal pattern, there must be a prior trend to reverse. Ideally, the falling wedge will form after an extended downtrend and mark the final low. The pattern usually forms over a 3-6 month period and the preceding downtrend should be at least 3 months old.
2. Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be lower than the previous highs.
3. Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be lower than the previous lows.
4. Contraction: The upper resistance line and lower support line converge to form a cone as the pattern matures. The reaction lows still penetrate the previous lows, but this penetration becomes shallower. Shallower lows indicate a decrease in selling pressure and create a lower support line with less negative slope than the upper resistance line.
5. Resistance Break: Bullish confirmation of the pattern does not come until the resistance line is broken in convincing fashion. It is sometimes prudent to wait for a break above the previous reaction high for further confirmation. Once resistance is broken, there can sometimes be a correction to test the newfound support level.
6. Volume: While volume is not particularly important on rising wedges, it is an essential ingredient to confirm a falling wedge breakout. Without an expansion of volume, the breakout will lack conviction and be vulnerable to failure.
stockcharts.com/help/doku.php?id=chart_school:chart_analysis:chart_patterns:falling_wedge_revers
What I would like to see... Volume and Money to Flow back temporarily in Gold. The idea is to trap the gold bugs into thinking this is a bullish repeat move of 2011. In 2011 the same scenario too place, congress was grappling over the debt ceiling which led to a US credit rating cut.
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