How to calculate the measurement target after the upward breakthrough of the "descending wedge"?

The descending wedge pattern suggests a potential bullish reversal in crypto, with a confirmed breakout offering a projected price target based on the wedge's height.

Jun 15, 2025 at 05:00 am

Understanding the Descending Wedge Pattern

A descending wedge is a technical analysis pattern typically found in price charts of cryptocurrencies. It is characterized by two converging trendlines: one drawn along a series of lower highs (resistance) and another connecting a series of higher lows (support). This pattern usually indicates a potential bullish reversal, especially when it appears at the end of a downtrend.

In the context of cryptocurrency trading, recognizing a descending wedge can be crucial for anticipating upward breakouts. Traders often look for volume confirmation during the breakout phase to ensure the move is legitimate and not a false signal. The key lies in identifying whether the price closes convincingly above the upper trendline.

Important: A valid breakout must occur with increased volume, which supports the strength of the move.

Confirming an Upward Breakout

Before calculating any measurement target after an upward breakout from a descending wedge, traders must first confirm that the breakout is genuine. This involves:

• Watching for a clear close above the upper trendline.
• Observing a spike in trading volume accompanying the breakout.
• Avoiding premature entries before confirmation.

If the price retests the broken trendline as new support shortly after the breakout, it adds further validation to the pattern.

Important: False breakouts are common in volatile crypto markets; patience and confirmation are essential.

Determining the Height of the Wedge

Once the breakout has been confirmed, the next step involves measuring the height of the descending wedge. This is done by taking the vertical distance between the upper and lower trendlines at the widest part of the pattern, usually near the beginning.

To calculate this:

• Identify the highest point within the wedge.
• Identify the lowest point at the same segment of the wedge.
• Subtract the lower value from the higher value to get the range.

This measured height becomes the basis for projecting the potential price target after the breakout.

Important: The height should be calculated at the broadest section of the wedge for accuracy.

Projecting the Measurement Target

After obtaining the height of the wedge, traders can project the measurement target by adding this value to the breakout level. Here’s how to do it step-by-step:

• Determine the exact price where the breakout occurred.
• Take the previously calculated wedge height.
• Add that height to the breakout price to arrive at the projected target.

For example, if the wedge height is $200 and the breakout occurs at $1,000, then the projected target would be $1,200.

Important: The measurement target serves as a guide rather than a guarantee due to market volatility.

Using the Target in Cryptocurrency Trading

In practice, the projected target acts as a reference point for setting profit-taking levels or adjusting stop-loss orders. Some traders may choose to exit partially at the target while trailing stops on the remainder for potential extended moves.

It’s also beneficial to combine this method with other indicators such as moving averages, RSI, or Fibonacci extensions to enhance trade validity.

• Consider using candlestick patterns near the target zone for added confluence.
• Monitor volume as the price approaches the target.
• Adjust expectations based on broader market conditions.

Important: Never rely solely on one technical pattern; always use additional tools for confirmation.

Frequently Asked Questions

What if the breakout occurs without a significant increase in volume?

A breakout without strong volume may indicate weak conviction among traders, increasing the likelihood of a false move. In such cases, it's safer to wait for a retest or seek additional confirmation before entering a trade.

Can descending wedges appear in both uptrends and downtrends?

Yes, descending wedges can form in both uptrends and downtrends. However, their implications differ. In a downtrend, they suggest a potential bullish reversal, whereas in an uptrend, they may indicate a continuation of the bullish trend.

How reliable is the measurement target in highly volatile crypto markets?

While the measurement target provides a useful estimate, extreme volatility in crypto markets can cause prices to overshoot or fall short of projections. Always consider market sentiment and macro factors alongside technical signals.

Is there a minimum number of touches required on each trendline for a valid descending wedge?

Typically, a valid descending wedge should have at least two touches on each trendline — upper and lower — to establish its structure. Fewer touches may result in an unreliable pattern.