How to Draw Broadening Formation Pattern Correctly

The broadening formation, also known as an inverted triangle or megaphone top, is a rare and unusual variation of the triangle pattern. Unlike other triangular patterns, where the trendlines converge, the trendlines in the broadening formation diverge, creating an expanding triangle shape. This is typically seen as a sign of a market that is out of control and emotional, with a high degree of public participation.

This pattern typically occurs at major market tops and is considered bearish. Additionally, the volume pattern in this formation is different than other triangular patterns, with volume expanding along with the wider price swings, rather than diminishing. This can indicate a potential market trend reversal.

Figure 6.5 A broadening top. This type of expanding triangle usually occurs at major tops. It shows three successively higher peaks and two declining troughs. The violation of the second trough completes the pattern. This is an unusually difficult pattern to trade and fortunately is relatively rare. 
This website or its third party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. By tapping on "I accept" you agree to the use of cookies.