Decreasing volume shows a lack of interest in the upside move and warrants some skepticism. In our opinion, the price is going to drop. Lets explore the descending broadening wedge and its implications for potential price action. At the moment the price is overbought when looking at the RSI. If the handle dives too deep and erases most of the gains of the cup, you should avoid trading the pattern. For example, if a cup forms between 99 and 100, the handle should form between 100 and 99.50, ideally between 100 and 99.65. The trade can be entered once the price breaks out of the pattern to the upside. Ideally, the price should stay within the top 1/3rd of the height of the cup. This shows increased buying interest that will move the price towards the target. A descending broadening wedge is a bullish reversal pattern. It is characterized by increasing price volatility and diagrammed as two diverging trend lines, one rising and one falling. During inverse head and shoulders patterns (market bottoms), we would ideally like the volume to expand as a breakout occurs.
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