Broadening bottoms
Appearance: Drawing trend lines at tops and bottoms of the formation it gives the impression of the silhouette of an ancient turntable’s horn.
Identification:
Price Trend: declining.
Shape: Price seems an oscillating pattern with increasing amplitude.
Trend lines: The two trend lines across minor tops and bottoms diverge from each other. The upper trend line must be ascending or horizontal. The bottom one should be pointing down.
Touches: According to Thomas N. Bukowski’s book on patterns, a broadening bottom needs at least two minor highs and two minor lows to validate the pattern.
Volume: Volume follows price. When the price falls so does volume, and when price moves up volume increases, as well.
How to trade it: When the channel is wide enough, buy near the lower trend line and sell on weakness or when it touches the higher trend line. Also buy a pullback after the breakout or breakdown, if it fails.
Broadening tops
Appearance: Similar to an upside down widening bottom.
Identification:
Price Trend: Ascending.
Shape: Price seems an oscillating pattern with increasing amplitude.
Trend lines: The two trend lines across minor tops and bottoms diverge from each other. The upper trend line must be ascending. The bottom line should be pointing down or horizontal.
Touches: According to Thomas N. Bukowski’s book on patterns, a broadening top needs at least two minor highs and two minor lows to validate the pattern.
Volume: Volume follows price. When the price falls so does volume, and when price moves up volume increases, as well.
How to trade it: This formation may show a trend change, but sometimes is just a trend continuation. When the channel is wide enough, sell near the higher trend line and buy when it touches the lower trend line. Also, buy the breakdown from the lower trend line.
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