Broadening Tops

As of 06/02/2023

Indus: 33,763 +701.19 +2.1%

Trans: 14,150 +270.31 +1.9%

Utils: 900 +9.20 +1.0%

Nasdaq: 13,241 +139.79 +1.1%

S&P 500: 4,282 +61.35 +1.5%

YTD

+1.9%

+5.7%

-7.0%

+26.5%

+11.5%

Targets Overview: 05/30/2023

33,950 or 32,000 by 06/15/2023

14,600 or 13,350 by 06/15/2023

935 or 880 by 06/15/2023

13,600 or 12,200 by 06/15/2023

4,350 or 4,000 by 06/15/2023

Chart Pattern Indicator:

on 6/1/23

As of 06/02/2023

Indus: 33,763 +701.19 +2.1%

Trans: 14,150 +270.31 +1.9%

Utils: 900 +9.20 +1.0%

Nasdaq: 13,241 +139.79 +1.1%

S&P 500: 4,282 +61.35 +1.5%

YTD

+1.9%

+5.7%

-7.0%

+26.5%

+11.5%

Targets Overview: 05/30/2023

33,950 or 32,000 by 06/15/2023

14,600 or 13,350 by 06/15/2023

935 or 880 by 06/15/2023

13,600 or 12,200 by 06/15/2023

4,350 or 4,000 by 06/15/2023

Chart Pattern Indicator:

on 6/1/23

Bulkowski on Broadening Tops

For more information on this pattern, read Encyclopedia of Chart Patterns

, pictured on the right, pages 63 to 80. That chapter gives a complete review of the chart pattern, compared to what is described below.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

Broadening Tops: Overview

The broadening top is a poor performer. The break even failure rate is above average and the average rise or decline is below average. Partial rises and declines help predict the breakout direction and allow a trader to enter the stock sooner, but also increase the risk of failure.

Broadening Tops: Important Bull Market Results

The above numbers are based on 1,215 samples for upward breakouts and 804 for downward breakouts. See the glossary for definitions.

Broadening Tops: Identification Guidelines

Characteristic	Discussion
Price trend	Upward leading to the pattern. That is, the trend start is below the pattern's start.
Shape	Higher peaks and lower valleys -- a megaphone shape.
Trendlines	The top trendline slopes upward, the bottom one slopes downward.
Touches	At least five touches total, three peaks or three valleys should touch the associated trend line with two or more touches of the other trendline. Ideally, the second of three touches will touch (instead of coming 'close' to) the trendline. This avoids the identification problem where price forms an up-sloping channel with an upward spike at pattern's end.
White space	Price should cross the pattern from side to side, filling the area with price movement.
Breakout	Can occur in any direction (upward 60%) and it happens when price pierces a trendline or moves above/below the end of the pattern.

Broadening Tops: Trading Tips

Trading Tactic	Explanation	The Measure Rule
Measure rule	Compute the difference between the highest peak (A) and lowest valley (B) in the pattern to get the height. Add the height to the pattern's top (for upward breakouts, works 66% of the time) or subtract it from the pattern's bottom (downward breakouts, works 42% of the time). Or multiply the height by the "percentage meeting price target" (see above) and add it to the highest peak (A, upward breakout) or subtract it from the lowest valley (B, downward breakout) to get a price target, D or E, respectively.
Intraformation trade	Buy when price rebounds off the lower trendline (C), and short at the top (A) when price heads down.
Buy at 3rd touch	When price touches the bottom trendline for the third time (C) and begins rising, buy.
Short at the top	When price touches the top trendline and begins falling (A), sell or sell short.
Partial rise	A partial rise works 52% of the time.
Partial decline	A partial decline works 72% of the time
Price trend	The best performing patterns with upward breakouts are those with an intermediate-term (3-6 months) rise leading to the pattern (from the trend start).
Yearly low	Downward breakouts near the yearly low perform best. Upward breakouts prefer the middle range. The link to the left discusses performance, and the following link provides additional information.
Breakout	The breakout direction is upward 60% of the time.
Throwbacks and pullbacks	Both hurt post breakout performance when they appear.

Broadening Tops: Time Performance

The table shows the performance of broadening top chart patterns in bull markets over the last three decades.

Broadening Tops: Example

A quick rise starts at A and leads to the broadening top chart pattern. Price oscillates up and down in broadening turns before dropping out of the bottom of the chart pattern and staging a downward breakout.

A pullback ensues, allowing price to recover and traders to exit before the decline resumes. Price attempts to return to the launch point A in late September, but does not make it.