As of 09/18/2020
  Indus: 27,657 -244.56 -0.9%  
  Trans: 11,432 -120.44 -1.0%  
  Utils: 798 -12.86 -1.6%  
  Nasdaq: 10,793 -117.00 -1.1%  
  S&P 500: 3,319 -37.54 -1.1%  
YTD
-3.1%  
 +4.9%  
-9.2%  
 +20.3%  
 +2.7%  
  Targets    Overview: 09/14/2020  
  Up arrow29,400 or 26,700 by 10/01/2020
  Up arrow11,750 or 10,600 by 10/01/2020
  Up arrow845 or 775 by 10/01/2020
  Up arrow11,800 or 10,400 by 10/01/2020
  Up arrow3,600 or 3,200 by 10/01/2020
CPI (updated daily): Arrows on 8/18/20
As of 09/18/2020
  Indus: 27,657 -244.56 -0.9%  
  Trans: 11,432 -120.44 -1.0%  
  Utils: 798 -12.86 -1.6%  
  Nasdaq: 10,793 -117.00 -1.1%  
  S&P 500: 3,319 -37.54 -1.1%  
YTD
-3.1%  
 +4.9%  
-9.2%  
 +20.3%  
 +2.7%  
  Targets    Overview: 09/14/2020  
  Up arrow29,400 or 26,700 by 10/01/2020
  Up arrow11,750 or 10,600 by 10/01/2020
  Up arrow845 or 775 by 10/01/2020
  Up arrow11,800 or 10,400 by 10/01/2020
  Up arrow3,600 or 3,200 by 10/01/2020
CPI (updated daily): Arrows on 8/18/20

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.

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
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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.

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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.

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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

 

 

 

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Broadening Tops: Other Examples

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.

My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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