I've noticed that many traders overlook one of the most reliable patterns for identifying bearish opportunities. It's about the rising wedge — when the price seems to be going up, but the momentum weakens, and the trend lines gradually converge. It sounds simple, but if you learn how to read it, you can catch good reversals.

The essence is that a rising wedge forms when the highs and lows become progressively higher, but the distance between them decreases. The upper and lower trend lines are inclined upward but gradually converge to a single point. And here’s the key — volume usually decreases as this pattern develops. This signals that the bullish trend is losing strength.

When I see this pattern, I wait for a confirmed breakout. The price should close below the lower support line with good volume — that’s the signal to enter a short position. It’s not advisable to enter earlier, as you might fall for a false breakout.

There are two main scenarios. First — a rising wedge appears at the end of a long upward trend and signals a reversal to the bearish side. Second — it appears in a downtrend as a pause before further decline. In both cases, the logic is the same: the price falls below support, and we open a short.

For entry, I usually wait until the candle closes below the trend line. I set a stop-loss slightly above the last high inside the wedge or above the upper trend line — this protects against false breakouts. I calculate the target simply: I take the height of the rising wedge at the start of formation and project that distance downward from the breakout point.

Combining this pattern with indicators is especially helpful. RSI shows bearish divergence — the price is rising, but the oscillator is falling, which strengthens the signal. MACD with a bearish crossover near the breakout also confirms that a reversal is close. If the price is also below key moving averages like the 50-EMA, it’s an even more perfect setup.

Many make mistakes by entering too early, before the confirmed breakout of the rising wedge. Or they ignore volume — a breakout on low volume often turns out to be a trap. I’ve also seen traders not use stop-losses, which leads to unnecessary losses.

Sometimes after the breakout, the price retests the lower line, which now acts as resistance. That’s also a good moment to short if volume confirms the move.

The key to success is patience and discipline. Not all converging trend lines are a valid rising wedge, so you need to ensure the pattern meets all criteria. Wait for confirmation, check volume, use indicators, set a stop-loss and target levels. With this approach, the rising wedge becomes one of the most profitable patterns in a trader’s arsenal.