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The wedge appears as the lines approaching the convergence as these lines show either the rising or falling and differing rates. These are useful indicators of a possible price action reversal.
Interpreting a Wedge Pattern
* A sell signal is given if the pattern happens in a downtrend as the price falls below the support line;
* A buy signal if it happens during an uptrend as the price exceeds resistance line (a certain deviation is possible).
After a Wedge forms, the price changes in the same direction in which it moved before the pattern. Calculate the target level through the following:
If a downtrend:T = BP - (TS - PS) For an uptrend: T = BP + (PS - TS) In the formula: T is the target price; BP - breakdown point; TS is the starting point of the trend; PS is the starting point of the template.
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