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Wedges and Facts and Fictions
By: Rambus Chartology | Monday, December 31, 2012
This post is for new subscribers that might not understand how I interpret
chart patterns and especially wedges. There is a myth out there that a rising
wedge or flag has to be bearish and a falling wedge has to be bullish. As I
stated on numerous occasions that a wedge or flag pattern are the same as any
other chart pattern. It can be a consolidation pattern or a reversal pattern
depending on how many reversal points it has. Whichever way it breaks out is
the direction of the next move.
Below are some examples of bullish rising wedges or bullish rising flags.
If one would have recognized the 6 point bullish rising flag during the grand
finally of the great tech bull market that topped out in 2000, one would have
gotten out very close to the top. The blue arrows measures the bullish rising
flag as a halfway pattern.
FNV had a beautiful 8 point bullish rising wedge halfway pattern that reached
it's price objective and now is either building a consolidation pattern or
a topping pattern, red rectangle. You can see there was a false breakout from
the bottom red rail where the price action immediately rallied back inside
the rectangle and has, so far, been only able to reach the center red dashed
rail. Which ever way the red rectangle breaks out will be the next move for
FNV.
This next chart shows the important chart patterns for gold's bull market
to date. As you can see there have been two bullish rising wedges and another
chart pattern that you won't find in most books on chart patterns and that
pattern is a bullish expanding falling wedge. As you may note each pattern
on the chart below shows up at roughly the halfway point separating each impulse
leg up.
Silver built a beautiful bullish rising wedge that started the near parabolic
rise to 50. There was also a red bullish rising flag halfway pattern that helped
in determining the PO to 49.68. Note our current 5 point blue rectangle that
is now trading in the brown shaded area that shows support at the previous
little high at the bottom and the current double top hump. This is what I call
a ping pong move bouncing between support and resistance.
Lets look at the current setup for the XAU that shows the blue 5 point bearish
falling wedge as the top and now we have another falling wedge that has 5 reversal
points so far and is testing the top rail which it will either breakout to
the topside or will reverse back down at point number 6? Critical test taking
place today.
So again a rising wedge of flag can be either a consolidation pattern or a
reversal pattern depending on how many reversal points its has. They are no
different than any other chart pattern.
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