Bulkowski on Broadening Formations, Right-Angled and Ascending

AMGN (Amgen, 4 June 2014 to 7 July 2014). Let's start with a winner. This chart pattern is unusual because it ignores the long term uptrend like that shown here (more of it is off the chart at the start). It pushes through overhead resistance setup by the broadening top and continues rising.

I've seen this behavior a lot where the RABFA is at the top of the chart and all it has to do is breakout to new territory, a short distance away, to be free of overhead resistance. The stock then soars. There are examples where that's not true, but it seems to be a reliable buy signal.

AEP (American Electric Power, 17 August 2011 to 1 September 2011). In this example, the stock eventually pushes above resistance. When that happens, the move can be profitable. A longer-term chart shows the stock climbing into the 60s, but it was a bumpy ride.

ABDE (Adobe 2/9/12 to 3/2/12). In this example of a failed trade, the chart pattern neared the bottom of overhead resistance setup by prior peaks and valleys (between the two horizontal red lines).

The chart pattern broke out upward but soon reversed and dropped below the bottom of the chart pattern, where a stop loss order waited.

AEL (American Equity Investment Life Holding from 29 September 2016 to 24 October 2016). The horizontal red line shows where I expected overhead resistance to stop an advance. With price sitting at the top of the chart pattern (the RABFA), there wasn't a lot of room for growth. So I skipped the trade. The pattern broke out downward, reversed, and busted the downward breakout. Although it looks as if the stock didn't rise far, the bust carried it to 28 (not shown).

ADSK (Autodesk from 26 August 2014 to 19 September 2014). Here's an example of a multipeak pattern posing overhead resistance that stops an advance.

The triple top (blue circle) signals overhead resistance is present combined with the earlier peak (February 2014) presents a challenge that the stock can't overcome. The stock hits resistance and reversed, busting the upward breakout.

ARW (Arrow Electronics from 15 December 2016 to 25 January 17). A fast rise in the stock lead to a slowdown when the RABFA formed. An upward breakout didn't take the stock much higher at all before it failed. This type of failure is hard to identify because what is meant by a 'fast rise'? Does a fast move actually cause price to retrace?

ADBE (Adobe 9/27/16 to 10/24/2016). The tall gap is what I consider as part of a fast rise setup. It's a dangerous setup for a bullish trader. Price rises quickly going into the pattern and often the breakout is downward. No buy signal triggers, so traders remain out of the stock. But you'll want to avoid the fast rise leading to the start of a chart pattern.

I show another example of the fast rise in the inset box in Amazon.com stock.

ALK (Alaska Air from 19 June 2014 to 16 July 2014). This is another variation of the 'avoid the long uptrend' setup. In this case, the chart pattern appears after a long uptrend. In this case, placing a buy stop a penny above the top of the chart pattern avoids buying this stock and suffering through the decline.

AGO (Assured Guaranty from 23 August 2016 to 8 September 2016). The RABFA broke out downward so a buy stop didn't trigger until the pattern busted the downward breakout. The price made a strong push higher, piercing overhead resistance.

ACN (Accenture PLC, from 28 April 2015 to 11 May 2015). The RABFA formed and it looked like it might be part of a double top so I avoided the trade. However, the stock climbed to a high of 105 before reversing and the potential double top never confirmed as a valid chart pattern (which means the stock didn't close below the lowest valley between the two peaks, so it wasn't a valid double top).