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Chapter 4. More Than Just Pretty Picture... > The Wedge Formation: Times to Accumu...

The Wedge Formation: Times to Accumulate and Times to Distribute Stocks

The Wedge Formation

Rising wedge formations are created when the following conditions take place:

  • The stock market (or other markets or individual investments) rises in price.

  • Trendlines drawn that reflect support lines rise at a constant angle.

  • Trendlines that reflect resistance, where prices turn down, can be drawn at a constant angle as well, but the angle of rise is less than the angle of the support trendline. The result is a converging channel.

  • Trading volume decreases as the formation develops. This is an important condition because declining volume during uptrends suggests a reduction in buying pressures.


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