Possible reversal/renewal of a downward trend.
Direction depends on when volume returns
The pattern should display two highs touching the upper trend line and two lows touching the lower trend line.
The pattern should display two highs touching the upper trend line and two lows touching the lower trend line.
Underlying Behavior
This pattern is a result of converging trendlines of support and resistance which give this pattern its distinctive shape. This occurs because the trading action gets tighter and tighter until the market breaks out with great force. Buyers and sellers find themselves in a period where they are not sure where the market is headed. Their uncertainty is marked by their actions of buying and selling sooner, making the range of the price movements increasingly tight. As the range between the peaks and troughs marking the progression of price narrows, the trendlines meet at the "apex".
The narrowing of the trading action and the decreasing volume of trade reflect the indecision in the market. Finally consensus or decision in the market is reached and this is reflected as the price breaks out of the Triangle/Wedge. A spike in volume on this breakout date reflects stronger consensus that the financial instrument should move in that direction.
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