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%
|
|
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%
| |
| ||
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.
Updated with new statistics on 8/25/2020.
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.
$ $ $
Click reverse symmetrical triangle to read about the Elliott wave version.
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 Top
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The above numbers are based on 1,215 samples for upward breakouts and 804 for downward breakouts. See the glossary for definitions.
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. |
Consult the associated figure on the right.
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. |
Breakout Direction | 1990s | 2000s | 2010s |
Up (average) | 40% | 49% | 36% |
Down (average) | 16% | 12% | 13% |
The table shows the performance of broadening top chart patterns in bull markets over the last three decades.
Upward breakouts did best in the 2000s but worst in the 2010s.
Downward breakouts outperformed in the 1990s compared to more recent decades.
The figure on the right shows an example of a broadening top chart pattern.
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.
-- Thomas Bulkowski
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