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  
  Up arrow33,950 or 32,000 by 06/15/2023
  Up arrow14,600 or 13,350 by 06/15/2023
  Up arrow935 or 880 by 06/15/2023
  Up arrow13,600 or 12,200 by 06/15/2023
  Up arrow4,350 or 4,000 by 06/15/2023
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  
  Up arrow33,950 or 32,000 by 06/15/2023
  Up arrow14,600 or 13,350 by 06/15/2023
  Up arrow935 or 880 by 06/15/2023
  Up arrow13,600 or 12,200 by 06/15/2023
  Up arrow4,350 or 4,000 by 06/15/2023

Bulkowski on Broadening Tops

For more information on this pattern, read Encyclopedia of Chart PatternsEncyclopedia 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.

-- Tom Bulkowski

$ $ $

Click reverse symmetrical triangle to read about the Elliott wave version.

Overview
Important Results
Identification Guidelines
Trading Tips
Time Performance
Example
See Also

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 top chart pattern appears
Broadening Top
Score your chart pattern for
performance by clicking here

Broadening Tops: Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 22 out of 39/28 out of 36
Break even failure rate for up/down breakouts: 18%/27%
Average rise/decline for up/down breakouts: 42%/13%
Throwback/pullback rate: 67%/67%
Percentage meeting price target for up/down breakouts: 66%/42%

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

CharacteristicDiscussion
Price trendUpward leading to the pattern. That is, the trend start is below the pattern's start.
ShapeHigher peaks and lower valleys -- a megaphone shape.
TrendlinesThe top trendline slopes upward, the bottom one slopes downward.
TouchesAt 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 spacePrice should cross the pattern from side to side, filling the area with price movement.
BreakoutCan occur in any direction (upward 60%) and it happens when price pierces a trendline or moves above/below the end of the pattern.

Top of page More

Broadening Tops: Trading Tips

Consult the associated figure on the right.

Trading TacticExplanation Broadening top measure rule
The Measure Rule
Measure ruleCompute 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 tradeBuy when price rebounds off the lower trendline (C), and short at the top (A) when price heads down.
Buy at 3rd touchWhen price touches the bottom trendline for the third time (C) and begins rising, buy.
Short at the topWhen price touches the top trendline and begins falling (A), sell or sell short.
Partial riseA partial rise works 52% of the time.
Partial declineA partial decline works 72% of the time
Price trendThe 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 lowDownward 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.
BreakoutThe breakout direction is upward 60% of the time.
Throwbacks and pullbacksBoth hurt post breakout performance when they appear.

Top of page More

Broadening Tops: Time Performance

Bull Market Performance Over Decades
 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.

Broadening top chart pattern example

Broadening Tops: Example

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

Top of page More

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com If you buy ANYTHING while there, they pay for the referral.
Legal notice for paid links: "As an Amazon Associate I earn from qualifying purchases."

My novels:  Remember Me book Bumper's Story book Head's Law book
My stock market books:  Chart Patterns: After the Buy Getting Started in Chart Patterns 2nd edition book Trading Basics book Fundamental Analysis and Position Trading book Swing and Day Trading book Encyclopedia of Chart Patterns 3rd Edition book

Copyright © 2005-2023 by Thomas N. Bulkowski. All rights reserved.
Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.
Some pattern names are registered trademarks of their respective owners.
Home Advertise Contact Donate Links Privacy/Disclaimer

You don't make sense often. Today might be the day.Smiley