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Phase 2 would be when the consolidation phase begins, which causes the price action to fall. The price action trades higher, but the buyers lose momentum at one point, and indeed, the bears take momentary control of the price. The far more pervasive falling wedge formation takes place during a strong uptrend. The first two elements are required features of a falling wedge, while an occurrence of decreasing volume is highly beneficial because it adds legitimacy and plausibility to the pattern. As the channel progresses, the volume decreases.There are two converging trend lines (upper and lower).Price action is currently in a downtrend (lower highs as well as lower lows).Following the channel’s consolidation of energy, buyers can tilt the balance to their advantage and initiate the price action higher.Īs a result, a falling wedge pattern has three distinct characteristics: The volume decreases as the channel converges, a crucial feature of a falling wedge pattern. When the price action breaks through to the upper trend line and the wedge’s resistance, the consolidation phase comes to an end. Two converging trend lines are drawn within this pullback. The falling wedge pattern appears when the asset’s price moves in quite an overall bullish trend before correcting lower. A falling wedge pattern is generally regarded as a reversal pattern, though it can also facilitate the continuation of the same trend. When these two patterns are combined with a rising wedge formation, they form a solid bullish flag pattern that suggests a change in trend direction. The falling wedge pattern indicates a bullish trend.