The Wedge Pop
Master “The Money Pattern” – Learn to identify the pivotal moment that confirms a bottom and signals the start of a new uptrend
The Wedge Pop, referred to as “The Money Pattern” by Oliver Kell, is a pivotal moment in a stock’s price cycle that confirms a bottom has been established, and a new uptrend is beginning. Recognizing and trading the Wedge Pop can offer early entry into powerful price movements. In this lesson, you’ll learn how to identify the Wedge Pop, understand its role in the Cycle of Price Action, and use it to position yourself for significant gains as stocks transition from downtrends to uptrends.
Learning Objectives
By the end of this lesson, you will be able to:
- Identify the Wedge Pop as a confirmation of a new uptrend
- Understand how price volatility and volume behavior change during the Wedge Pop
- Recognize pivot points and their role in confirming trend reversals
- Use gaps and volume spikes as signals for momentum and trend continuation
- Apply the Wedge Pop pattern to both individual stocks and stock indices
What is a Wedge Pop?
Defining the Wedge Pop
The Wedge Pop is a key moment that confirms a stock has bottomed and is ready to begin a new uptrend. After the initial Reversal Extension, the stock typically consolidates under the moving averages, tightening into a narrower price range. This period of low volatility sets up a buy area as the stock prepares for a breakout.
Once the stock breaks through the moving averages and accumulation volume increases, the Wedge Pop signals that the stock is ready to reverse its downward trend and start climbing higher.
Example: MSTR 2024
After a long decline, a stock like MSTR in 2024 shows a tightening range and increasing volume before breaking through the moving averages in a Wedge Pop, confirming the uptrend has started.
Key Elements of a Wedge Pop
The Bottoming Process
Each stock’s bottoming process is unique, depending on its character and market environment. However, the Wedge Pop typically follows a few key steps:
Key Steps
- Price Consolidation: After the Reversal Extension, the stock may drift sideways or slightly lower. This tightening range is a sign that volatility is decreasing and a tradable range is forming.
- Volume Shift: Watch for a decrease in distribution volume (selling pressure) and an increase in accumulation volume (buying interest). This change in volume character confirms that buyers are stepping in.
Confirmation of the New Uptrend
The Wedge Pop confirms a change in the stock’s price action. The stock breaks through the moving averages with increasing volume, signaling that it has found strength and is ready for a new uptrend.
Forming a Pivot: The Key to Trading the Wedge Pop
Understanding Pivot Points
A pivot point is a critical price level where the stock either continues its trend or changes direction. During a Wedge Pop, the stock will often bounce between the moving averages and its recent lows, forming a pivot as it retests these levels.
Pivot Signals
- If the price breaks above the pivot, it signals the start of an uptrend
- If the price fails at the pivot and reverses lower, it indicates that the uptrend has not yet begun
Trading the Wedge Pop
To trade the Wedge Pop effectively:
Trading Steps
- Wait for the pivot to form: Watch for the price to consolidate under the moving averages
- Look for confirmation: Buy on a strong price bar with increased volume as the stock breaks through the pivot
- Manage risk: Place a stop just below the low of the consolidation range to protect against a failed breakout
Gaps and Momentum
Gaps as a Sign of Momentum
Gaps occur when there’s a significant imbalance between buyers and sellers, often catching the market off guard. According to Oliver Kell, gaps can be subtle or large, but they are a strong signal of momentum during a Wedge Pop.
Gap Types
- Unfilled gaps: These show strength, as the price doesn’t pull back to close the gap, indicating strong buyer demand
- Filled gaps: Smaller gaps that are quickly retested may still signal an uptrend, but the momentum is less powerful
Most Wedge Pops that start new trends often include unfilled gaps with strong volume, showing that buyers are firmly in control.
Example: CRWD 2023
CRWD in 2023 formed a Wedge Pop with several large gaps, indicating that the market was caught off guard, and the stock was ready to rally.
Applying the Wedge Pop to Indices and Stocks
Screening for Leading Stocks
When the stock market is bottoming, not all stocks behave the same. Some will show relative strength, resisting the broader decline. As the market forms a Wedge Pop, these leading stocks will be further along in their Cycle of Price, often breaking out of their own bases.
Market Wedge Pop: When the market itself forms a Wedge Pop, look for strong stocks that are already near their highs. These stocks will likely be the first to break out and make new highs as the market recovers.
Example: QQQ in 2023
In the Fall of 2023, the QQQ index followed a three-wave down correction. The first two Wedge Pop attempts failed due to a lack of accumulation volume and persistent selling. However, the third Wedge Pop succeeded, with three unfilled gaps signaling strong momentum and the start of a new uptrend.
Reflection
After reviewing your current trading strategy, how might you incorporate the Wedge Pop to improve your timing and stock selection in future trades?
Conclusion
The Wedge Pop is a confirmation that a stock or market has bottomed and is ready to begin a new uptrend. By understanding the key elements of this pattern—price consolidation, pivot formation, and volume behavior—you can position yourself early in the Cycle of Price and ride the uptrend as it unfolds.