Broadening Top – A broadening top forms in a uptrend and potentially signals a bear market reversal. It forms what looks like a megaphone as the price expands with higher highs and lower lows. This chart pattern gives the appearance of a potential correction before moving higher, but instead signals a reversal in the previous trend. A broadening bottom is a form of consolidation and forms a support for the bear reversal.
Confirmation of Chart Pattern – A Broadening Top is confirmed when the price stalls prior to making a higher high (after making at least 2 highs and 2 lows) and heads lower taking out the previous low.
Psychology of Pattern – This chart pattern exhibits a unique shape; since its primary characteristic is that it has higher highs and lower lows. This chart pattern shows us a market that is attempting lure more money in by instilling a feeling of “don’t miss the bus” but then fails and the market moves in the path of least resistance.
Market Signal – The Broadening Top is a bearish reversal.