The breakout is also important because it provides a trading opportunity. However, if the price breaks up above the upper trend line, it is a signal that the pattern is still valid and that the trend is likely to continue. If the price breaks down below the lower trend line, it is a signal that the pattern has been invalidated and that the trend is likely to reverse. The breakout is the most important part of the rising wedge pattern. What is the significance of the breakout? This will give you the right to sell the security at a certain price, even if the price goes down. Put options: If you are not sure whether the pattern will break down, you can buy put options on the security.Your profit target would be the length of the wedge, measured from the breakout point to the top of the wedge. Short selling: If you believe that the pattern will break down, you can short sell the security at the breakout point.
A rising wedge can be traded in two ways:
