Falling wedge BULLISH

What a falling wedge is

A falling wedge is a decline whose range contracts as it goes: both the highs and the lows slope downward, but the two boundaries converge — each leg down makes less progress than the last. Unusually for a down-sloping structure, the conventional resolution is bullish: price breaks the upper boundary and reverses.

The psychology behind it

Healthy downtrends expand — fear feeds on itself and each break accelerates. A narrowing decline is the opposite signature: sellers still control direction but are visibly losing force. Every push down travels a shorter distance and attracts buyers a little earlier. The wedge is a picture of selling pressure decaying. When the upper boundary breaks, the remaining shorts — who watched their trade grind rather than pay — cover quickly, and the compressed range releases upward.

How MKTDATA detects it

The template encodes the down-drifting, converging oscillation with the trigger zone at the wedge's upper boundary. Because wedges are gradual, Dynamic Time Warping does real work here, matching stocks that trace the structure at different speeds. Momentum scoring rewards the classic bullish divergence into the lows, and staged matching frequently catches wedges mid-formation — this is consistently one of the most commonly matched shapes during broad market pullbacks.

Trading notes

Entry on the upper-boundary break, invalidation below the wedge's low, with targets commonly set at the wedge's origin. Two honest caveats: during market-wide declines, many stocks trace wedges simultaneously — those matches are correlated and will largely win or lose together with the index, and a "wedge" that keeps expanding rather than narrowing is just a downtrend. The measured statistics below aggregate across many sessions, which is what eventually separates the pattern's real edge from correlated coincidence.