A falling wedge is a chart pattern formed by drawing two descending trend lines, one representing highs and one representing lows.
It is categorized as a bullish reversal chart pattern.
The slope of the trend line representing the highs is lower than the slope of the trend line representing the lows, indicating that the highs are decreasing more rapidly than the lows.
It takes at least five reversals (two for one trend line and three for the other trend line) to form a good Falling Wedge pattern. The resulting shape forms a gradually narrowing wedge, giving this pattern its name. Falling wedges often come after a climax trough (sometimes called a “panic”), a sudden reversal of an uptrend, often on heavy volume. The falling wedge should be taken as a strong buy signal and an indication that a trend reversal is imminent.