Broadening Formation

The broadening formation is a sort of triangle, but not usually included with the three previous examples. As the name tells you, this triangle is the other way round, with the trendlines opening out as time passes, rather than converging to an apex. It sometimes also called a megaphone top.

This is a chaotic time in the market, and you are best not to trade it. The volume increases as the triangle broadens and the price swings more wildly, in contrast to the lessening volume expected with the usual converging triangles. All the activity in the market – which means you are more likely to see this in an uptrend – makes it hard to know where and when the price will break out, but it’s most often associated with a bearish move, as drawn above.

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