Although not as popular as the Bull Flag, the Broadening Descending Wedge (BDW) pattern frequently occurs in the crypto market. It consists of at least five swings between two broadening descending trend lines, with volume generally increasing while in the pattern. For those who wish to trade within this structure, it should be treated as a Bearish Pattern, with short trades being an option from point D down to the lowest low of the BDW.
Despite being a Bearish Pattern (particularly by those wishing to trade while the price is within the pattern structure), the overall pattern is a Bullish Continuation Pattern. An aggressive long entry can be taken at the lowest low of the pattern, especially if a Stop Hunt Pattern (SFP) is printed. In this case, the Stop Loss (SL) would be below the low of the SFP trigger candle. A more conservative entry is at the retest of the upper trend line after the price has broken out of the pattern.
The projected initial target or Measured Move would be at the high of the pattern at point B.
- At least three identifiable dips
- The 3rd dip often breaks below the channel
- Once the price reclaims the original lower trend line, this usually confirms a BDW
- Look to take profits at the Measured Move until proficient aggressively
- These patterns often bring a Bullish Divergence, which can be used as a further confluence for entry