Red Tribe Trading Article
In this article today, we will be looking at BWFAs. BWFAs are ascending wedge formations, which are a common TA formation. Below we can see an example of a BWFA.
BWFA
BWFs are known for having high volatility levels, with high risk/rewards when trading the formation.
BWFA construction
Looking at ascending resistance
The top of the BWFA is an ascending resistance, which is similar to a regular resistance line, the BWFA resistance prevents the crypto from moving upwards. Once the resistance is hit, a bounce is usually seen, forcing the crypto lower normally forcing the support to be hit.
Below we can see the ascending resistance.
BWF - ascending resistance
Section two - ascending support
Similar to the resistance, support is also ascending. The formation is broadening due to the support ascending at a varied angle than the resistance. This forces the lines to diverge, increasing distance between support & resistance.
BWFA support prevents the cryptocurrency from moving further down and continues to hold up the cryptocurrencies price.
Below there is a BWFA support example.
BWFA support
BWFA phases
When trading BWFAs, they mostly move in 5 waves. Waves gradually increase in size, with volatility increasing.
BWFA
Once wave five is completed, the cryptocurrency should see a move down to the support created at stage(3). The cryptocurrency will then have a decision to make with there being two options.
Option one is for the crypto to break below the key (3) support level, retesting the ascending support. From here there will likely be a fake breakout, misleading cryptocurrency users into believing that there will be continued upwards movement. Downwards movement will instead occur with support likely being found at (2), with substantial losses will be seen by traders placing longs at points (3) and (5).
BWFA decision time
Option two is when the crypto decides to retest and break above the resistance. From here the overhead resistance will flip into support, subsequently allowing for further price increase.