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Chapter 14, Part IV. Wedge pattern. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Once new sellers have opened their positions and the market has shown retracement – new buyers step in, i.e. those who want add to their positions and those who want to buy initially. This leads to a second swing in the wedge body. Then, those sellers, who were not in time to enter during first move down or decided to wait for some retracement will attempt entering short at this second possibility. That leads to the third move inside the wedge pattern, and this move is downward. This kind of price action appears again and again while the wedge is forming, but it has an important tendency – despite the fact, that the market moves down as the wedge pattern forming, sellers are not so strong, because they do not have sufficient power to force the market to establish new lower lows at the same pace as lower highs. It gives to any wedge pattern the quality of exhausting a market move, when the direction of wedge shows who in particular is exhausting while it is forming.

    If the wedge direction is downward – then sellers are exhausting gradually, if upward – then buyers. In our case it is sellers who are growing exhausted.

    Almost the same is happening when we see an upward wedge. In this case it looks like everything is OK – the market continues its move up, forms higher highs and higher lows. But the low-to-low pace is greater than the high-to-high and this tells, that although buyers still have charge to buy up all the sellers positions, they have less and less power to move the market higher. Their strength is exhausting gradually. When buyer’s power is not enough even to absorb positions of new sellers – then the market shows a downward breakout of the wedge. If new buyers will appear – the market could show only some retracement, if not, it could even be a turnover to the downside.
     
    #1 Sive Morten, Dec 21, 2013
    Lasted edited by : Mar 27, 2016
    Hamza Samiullah likes this.
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