Wedges in Trading Ranges

Hi Ashish,

Here's something interesting about wedges in TRs. 

In a strong trend we expect a wedge to be a pullback/flag and for trend to resume (like A). However, if it's a trading range, these bull flags tend to fail to the downside and become strong bear legs (that often end up becoming 2LT). So if seeing a bull flag near top of trading range it's best to not buy it but actually to look for bulls to fail and try to catch a sell.

On the other hand, eventually TRs will BO, and wedge pullbacks that are mostly flat and near one side of a TR are often a sign that a BO may be coming (like below). Probably because bulls are showing extreme weakness in not being able to reverse the bear leg for multiple attempts. This is different from a sloping wedge at bottom of TR above where bulls are succeeding at pushing higher and eventually bears give up. 

Hope this helped!
CH
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Great, you have remarkable clarity on how wedges to be considered in the trading ranges.

It helped me a lot,

Thank you a lot for giving time to reply to my query

Hi

Need your help in one more confusion that I have about wedges.

Wedges generally have 3 touches on one side and at least 2 touches on other side, does it mean we can have 3 touches on up side or down side irrespective of trend being in bull or bear.

Hi, I don't think so because a wedge is the market's attempt to bring the price down (in a bull trend) the market tries 3 times and if it cannot find enough sellers in that particular price range, market goes up to find more sellers which makes a wedge bull flag.

hope it helps.

Hi,

Yes, a wedge top can form in a bear trend and vice versa.

Above is an example of a wedge bear flag, It is a small wedge up that happens in a bear trend and it functions as a flag, so it has a higher probability of a bear trend resumption.