Subscribe to RSS feeds Bulkowski Blog via RSS

Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

Support this site! Clicking on his books (below) takes you to Amazon.com. If you buy ANYTHING, they pay for the referral.

Bulkowski's Right-Angled and Descending Broadening Formations

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/17/2014
17,157 24.88 0.1%
8,652 81.89 1.0%
557 -1.33 -0.2%
4,562 9.43 0.2%
2,002 2.59 0.1%
YTD
3.5%
16.9%
13.5%
9.2%
8.3%
Tom's Targets    Overview: 09/12/2014
17,300 or 16,800 by 10/01/2014
8,700 or 8,000 by 10/01/2014
530 or 570 by 10/01/2014
4,450 or 4,800 by 10/01/2014
1,960 or 2,050 by 10/01/2014
Wilder RSI: -0.5%

Written by and copyright © 2005-2011 by Thomas N. Bulkowski. All rights reserved.

For more information on this pattern, read Encyclopedia of Chart Patterns, Second Edition, pictured on the right, pages 45 to 62. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.

The right-angled and descending broadening chart pattern is the worst performing chart pattern in a bull market. The break even failure rate is high and the average rise is meager. This is not a chart pattern you'll want to curl up with at night and dream about unless you like losing money.

Right-angled broadening formation, descending
Right-Angled and Descending Broadening Formation

 

Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 23 out of 23; 13 out of 21
Break even failure rate for up/down breakouts: 19%; 14%
Average rise/decline: 28%; 15%
Throwback/pullback rate: 52%; 51%
Percentage meeting price target for up/down breakouts: 63%; 44%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Right-Angled and Descending Broadening Formation Identification Guidelines

CharacteristicDiscussion
Price trendCan be up or down leading to the pattern.
ShapeA megaphone tilted down with the top horizontal.
TrendlinesThe top trendline is horizontal, the bottom one slopes downward.
TouchesAt least two peaks and two valleys should touch their respective trendline.
Volume shapeTrends upward 54% to 59% of the time with a dome shape.
BreakoutUpward 51% of the time.

Top

Right-Angled and Descending Broadening Formation Trading Tips

Trading TacticExplanation
Measure ruleCompute the height from the horizontal trendline (B in the Measure Rule figure to the right) to the lowest valley (A) and multiply it by the above “percentage meeting price target.” Add the result to the horizontal trendline (B, upward breakouts) or subtract it from the lowest valley (A, downward breakouts) to get the price target (C).
Intraformation tradeBuy at the bottom trendline when price starts rising and sell or sell short once price turns at the horizontal trendline.
Buy at 3rd touchWhen price touches the bottom trendline for the third time and begins rising, buy.
Partial riseA partial rise works 54% of the time.
Partial declineA partial decline works 63% of the time.
Price trendThe best performing patterns are those with an intermediate- or long-term (over three months) price trend leading to the pattern.
Yearly middleFor both breakout directions, the middle third of the yearly price range performs best. For downward breakouts, the highest third also performs well.
Volume trendA rising volume trend results in the best post breakout performance.
Throwbacks and PullbacksThrowbacks and pullbacks hurt post breakout performance.
Right-angled and descending broadening formation measure rule
The Measure Rule

Top

Right-Angled and Descending Broadening Formation Example

Right-angled and descending broadening formation example

The above figure shows an example of a right-angled and descending broadening formation chart pattern. Price begins a decline at A that leads to the chart pattern. Price bounces between a horizontal trendline on the top and a down-sloping one along the bottom of the chart pattern. A partial decline at B signals an impending upward breakout at C. After the breakout, price makes a strong move upward.

-- Thomas Bulkowski

Top 

Other Right-Angled and Descending Broadening Formation Examples

See Also

Copyright © 2005-2011 by Thomas N. Bulkowski. All rights reserved. Does the information superhighway have any rest stops?