Broadening Formation

A broadening formation, also called a megaphone, has diverging trendlines. Each swing high is higher and each swing low is lower. The market is becoming less agreed, not more. It is the opposite of a triangle. Volatility is expanding and a breakout level keeps moving.

At least two higher highs and two lower lows, with lines that open to the right. A parallel channel does not broaden. A wedge converges.

There is no reliable bullish bias from the shape. A trade is possible off the edges only with a tight invalidation, because the next swing is supposed to be larger, not smaller.

Same caution the other way. Some classical work treats a broadening top as distribution. Treat that as a hypothesis until a swing actually breaks the prior structure and stays broken.

Trading a broadening range as if it were a rectangle. The boundaries are moving. Yesterday's high is not today's resistance.

Stops get hit by design, because the pattern is a series of false breaks of the prior extreme. It is one of the harder shapes to trade mechanically.