A short-term wedge is a consolidation formation that can occur in both upward and downward trends. A short wedge is formed by a rapid and significant rise or fall in the share price and it is a rebound against the dominant trend.
A short wedge means that the stock price moves in the opposite direction of the trend with gradually increasing peaks and bottoms in a downward trend or with gradually
decreasing tops and bottoms in an upward trend. A valid short wedge must have at least two peaks and at least two bottoms. A short-term wedge should have a falling volume during the formation. Two trend lines are drawn for short wedge, a trend line along the bottoms and a trend line along the peaks.
The price target for a short-term wedge is the share price at the top of the formation in an upward trend or the bottom of the formation in a downward trend. A buy signal is generated if the resistance level is passed under increasing volume if the main trend is upward. A sell signal is generated if the support level is passed under increasing volume if the main trend is downward.
