Bullish Wedge: Analysis and Trading Based on the Pattern
In conditions of high volatility and external risks, Russian traders are increasingly turning to graphical patterns that help precisely determine the moment to enter or exit the market. One of these powerful tools is the bullish wedge—a figure that forms after an upward trend and can serve as a signal for both continuation and reversal. This article examines all the important aspects of this pattern: its structure, conditions for formation, psychological background, confirming signals and strategies, as well as real cases and errors.
1. Definition and Structure of the Pattern
1.1 What is a Bullish Wedge and How Does It Look?
A bullish wedge is a chart configuration consisting of two lines of support and resistance that converge at a point, forming a narrowing channel. In most cases, the support line (lower) and the resistance line (upper) are slanted upwards or resemble a symmetrical triangle with a slight incline. This shape reflects a decrease in buying strength, a slowdown in growth, and a potential preparation for continuation of the trend or its reversal.
1.2 Variations and Types of Wedges
- Ascending Wedge: both lines slope upwards, with a gradual decrease in the growth rate forming inside, but the overall trend remains upward.
- Symmetrical Wedge: the lines converge at equal angles, forming a ticket-shaped figure that indicates a slowdown in momentum.
1.3 How Does It Differ from Other Figurative Models?
Unlike similar figures, such as ascending flags or triangles, a wedge is characterized by the convergence of lines, indicating an internal conflict between buyers and sellers, as well as a slowdown in the trend. It is crucial to accurately recognize the wedge to use it for trend entry or as a reversal signal.
2. Conditions for Formation and Verification
2.1 Preceding Trend
The pattern forms after a clearly defined upward trend, which should last for at least 5-7 bars on H4 or longer on D1—this increases the likelihood of its effectiveness as a continuation or reversal signal.
2.2 Touches of the Lines
To consider the figure confirmed, the support and resistance lines should be touched at least 3 times—preferably, the touches should reach 4-6. The more touches, the higher the reliability of the figure.
2.3 Angle of Incline and Duration
The optimal angle of incline for the lines is 20-45°, and the duration of the pattern's formation should range from 20-60 bars on H4 or 5-25 days on D1, which helps filter out overly short and overly long, less relevant forms.
2.4 Volume
The volume within the wedge typically decreases as it forms, signaling the exhaustion of buying activity and preparation for a potential breakout or reversal.
3. Market Psychology and Confirming Volumes
3.1 Exhaustion of Buyers
In the early stages of wedge formation, there is active pressure from buyers; however, with each bar, this activity weakens: the size of candle bodies and volumes decrease. This indicates a decline in demand and readiness for a change in direction in the market.
3.2 Activation Before Breakout
Before a key breakout, the market often shows spikes in volume, indicating attempts by large participants to accumulate positions or prepare for an impulse move upward.
3.3 The Role of Institutional Investors
They use the figure for accumulation and asset masking, creating an illusion of a loss of momentum. After that, at the breakout point, the volume sharply increases, enhancing the reliability of the signal.
4. Breakout and Retest: Classic Signals
4.1 Breakout of the Upper Boundary
A true signal occurs when a candle closes above the resistance line, and the volume must exceed the average during the formation period by 30-50%. This increases the chances of a successful entry.
4.2 Retest of the Level
After a breakout, the price often returns to the resistance line, which becomes support—this is a signal for entry with an improved risk-to-reward ratio.
4.3 False Breakouts
Breakouts without confirmation by volume and retest are less reliable: their effectiveness is below 50%, so filtering by volumes and retests is essential.
5. Using Technical Indicators
5.1 RSI
RSI values below 30 indicate oversold conditions, and exiting this zone during a breakout reinforces confidence in trend development.
5.2 MACD
A crossover of the MACD lines upwards or a histogram moving into the positive zone confirms a change in momentum.
5.3 ADX
A drop in ADX below 20 indicates weakness in the trend within the wedge during formation, while an increase above 25 signifies a trend resumption after the breakout.
5.4 Fibonacci Levels
During a breakout, levels at 38.2%, 50%, and 61.8% are noteworthy. Typically, retracements to these levels serve as points for planning targets or places for stop orders.
6. Entry Strategies and Risk Management
6.1 Aggressive Entry
After the candle closes on the breakout day, a long position is opened with a stop just below the minimum point of the last bar of the wedge.
6.2 Conservative Entry
After retesting the breached line and confirming with volume. In this case, the stop-loss is just below the retest level, and the target is the nearest significant resistance level or based on Fibonacci levels.
6.3 Risk Assessment and Target Calculation
The risk-reward ratio should be no less than 1:2. The size of the stop is determined by ATR×1.5, which helps account for current volatility and avoid random triggers.
7. Timeframes and Practical Cases in the Russian Market
7.1 Sberbank Shares (D1)
In April 2025, an ascending wedge formed at 260-278 ₽ over three weeks, with a breakout accompanied by a 60% increase in volume leading to a rise to 310 ₽ (+12%).
7.2 RTS Futures (H4)
May 2024: on the chart at 115000-120000 p., the breakout coincided with the release of macroeconomic data, resulting in an +8% rise in 10 days.
7.3 Brent (W1)
From June to September 2023, Brent oil formed a wedge at $75-$88, with the breakout causing an increase to $102 (+16%).
8. Comparison with Other Figures
| Figure | Signal | Period | Reliability | Features |
|---|---|---|---|---|
| Bullish Wedge | Continuation or Reversal | 5-25 days (D1) | 60-75% | Narrowing channel, volatility compression |
| Bullish Flag | Continuation | 5-10 days | 70-82% | Horizontal consolidation |
| Ascending Triangle | Continuation | 4-6 weeks | 68-80% | Horizontal base, upward movement at the top |
9. Common Mistakes and How to Avoid Them
- Entering without volume or retest confirmation
- Delaying entry—it's better to wait for confirmation
- Using excessively tight stops without considering ATR
- Trading on lower timeframes—effectiveness is lower
- Neglecting trend analysis
10. Conclusions and Recommendations
The bullish wedge combines a simple visual structure with psychological depth, making it a powerful trading tool. In the context of the Russian market, it is important to consider market features: dependencies on oil, geopolitics, volatility, and volumes. Correct application: volume confirmation, indicator filters, and precise entry points—ensures high effectiveness and minimal risks. The variability of strategies allows for both short-term and medium-term trading, which makes it highly applicable.
