A falling wedge is bullish for the same reason that often when a stock falls its technical condition can be said to have "improved."
An f.w. implies a campaign of distribution exhausting itself while being met with gradually firming demand. In theory, once the distribution is complete, "nothing" stands in the way of prices at least reaching the (higher) point at which the campaign began. The action that creates the falling wedge is obviously "bearish," in that it involves price deterioration(sometimes fairly severe, esp. in the instance of the so-called "false breakdown"), but it is bullish in the sense that it alerts traders to prepare to go long, as a successful breakout from the pattern can be read as the basis for a high probability long trade.
The descending triangle can involve a similar dynamic, and can even lead a given stock or index to traverse the same or similar price points as it might in the instance of the f.w. - it's just that the timing and typical course of the move will be much different. Buying interest can be seen to come into play repeatedly at the same price level (reinforcing the importance of multiple touches in drawing the horizontal line). In theory, this interest can become progressively exhausted, until eventually it disappears, leaving "nothing" in the way of the sellers, and allowing for a relatively fast collapse. Thus, though the triangle comes into play at a higher (i.e., more "bullish") price level, its trading implications can be more bearish. Of course, there's no ambiguity at all about the situations when the sellers are unable to turn price back to test the accumulation level, and a breakout through the descending line occurs. |
