Updated on March 5, 2023
This is a chart pattern in technical analysis signaling a bearish reversal. It is represented by a series of higher highs and lower lows and each high and low keep going progressively further apart. The pattern looks like a megaphone or a cone shape which gives it the name of the broadening top.
How to interpret the broadening top pattern?
The price range in a broadening top pattern keeps widening between each high and low over time. This indicates a loss of control by either buyers or sellers. This can lead to increased volatility which can also be seen as a bearish signal and a potential indication of a trend reversal.
Can broadening top patterns be used as a standalone indicator?
The broadening top pattern should be used in combination with other technical analysis tools like moving averages, trend lines, or support and resistance levels. This holistic approach is used to gain a more complete understanding of market trends as well as potential trade signals.