Falling Wedge Breakout Scanner
Automated real-time scanner detecting high-conviction Bullish Falling Wedge patterns (Reversals & Continuations), converging trendline contractions, and explosive upward breakouts across Indian equities.
How to Trade the Falling Wedge: Reversal vs Continuation
The Falling Wedge is a premier classical bullish technical formation characterized by two downward-sloping, converging trendlines. As the price moves lower within the pattern, swing volatility steadily contracts, and selling pressure diminishes until buyers overpower sellers, producing a dynamic upside breakout.
1. Converging Downward Geometry & Slopes
A valid Falling Wedge is formed by two downward-sloping trendlines connecting at least two swing highs and two swing lows. Crucially, the upper resistance trendline descends at a steeper slope than the lower support trendline. This causes both boundaries to steadily converge toward an eventual intersection point (the Apex), indicating that downside momentum is decaying.
2. Volume Contraction & Breakout Signature
Smart money accumulation is confirmed through volume behavior: trading volume consistently contracts and dries up as price compresses inside the wedge. Upon crossing above the upper resistance boundary, institutional demand unleashes an expanding breakout candle with volume spiking ≥ 1.3× to 2.0× the 20-day Volume SMA.
3. Subtype Distinctions: Reversal vs Continuation
Bullish Reversal: Develops following an extended multi-month downtrend. It signals seller exhaustion and marks a structural trend reversal from bear to bull.
Bullish Continuation: Develops after a strong impulsive advance. It acts as a healthy counter-trend consolidation or pullback flag, allowing the market to digest gains before resuming the primary uptrend.
4. Measured Targets & Risk Management
Wedge Height = Widest Vertical Span (H1 - L1)
Target 1 = Breakout Level + Wedge Height
Target 2 (Runner) = Swing High H1 or 1.618 Extension
Stop Loss = Lowest Swing Low in Wedge (L_last) - 0.5 ATR
5. Trade Execution Playbook: Cash Equity vs F&O Leverage
Buy on daily candle close above the upper resistance line accompanied by above-average volume. Ride towards Target 1 and trail remaining quantities with the 20 EMA.
Enter ATM call options or futures contracts upon confirmation of breakout above upper trendline, using a tight stop placed just beneath the breakout candle low.
Conservative traders can wait for a gentle throwback to test the broken upper resistance line (prior resistance turned support) on diminishing volume.