1. Prior trend. To be capable to meet the criteria of a reversal pattern, there must be a prior trend to reverse. The rising wedge generally forms over a 3-6 month period of time; this can modify as an average or long condition reversal. At times the current trend is enclosed inside the rising wedge. This pattern at other times will form after an extended share price advance.
2. Upper resistance Line: It broadly requires two response highs to define the upper resistance line but if possible three. The following reaction high should be higher than the preceding high.
3. Lower Support line: It generally requires two reaction lows to define the lower resistance line but preferably three. The following reaction low should be higher than the preceding low.
4. Contraction: As the pattern unfolds the upper resistance line and the lower support line are converging towards each other. The positive advance from the response lows (the lower support line), become shorter in duration. This makes the rally weak. This has the effect of the upper resistance line not keeping pace with the lower resistance line, the two lines then converge indicating an over supplying of stock as the share price rises.
5. Support Break: the bearish confirmation of the figure does not come until after the support line is violated in an outstanding manner. It is usually practical to wait for a break of the previous reaction low but once support is breached, there is occasionally a reaction rally or bounce to test the newly found resistance level.
6. Volume: Ideally the volume will soften as the share charge rises, the wedge starts to evolve. The increase in volume at the support line break can be interpreted as a bearish indicator or its confirmation.