As of 02/21/2024
  Indus: 38,612 +48.44 +0.1%  
  Trans: 15,582 +118.68 +0.8%  
  Utils: 854 +11.76 +1.4%  
  Nasdaq: 15,581 -49.91 -0.3%  
  S&P 500: 4,982 +6.29 +0.1%  
YTD
 +2.4%  
-2.0%  
-3.1%  
 +3.8%  
 +4.4%  
  Targets    Overview: 02/13/2024  
  Down arrow37,700 or 39,000 by 03/15/2024
  Up arrow16,400 or 15,400 by 03/01/2024
  Up arrow870 or 800 by 03/01/2024
  Down arrow15,000 or 16,400 by 03/15/2024
  Down arrow4,850 or 5,100 by 03/15/2024
As of 02/21/2024
  Indus: 38,612 +48.44 +0.1%  
  Trans: 15,582 +118.68 +0.8%  
  Utils: 854 +11.76 +1.4%  
  Nasdaq: 15,581 -49.91 -0.3%  
  S&P 500: 4,982 +6.29 +0.1%  
YTD
 +2.4%  
-2.0%  
-3.1%  
 +3.8%  
 +4.4%  
  Targets    Overview: 02/13/2024  
  Down arrow37,700 or 39,000 by 03/15/2024
  Up arrow16,400 or 15,400 by 03/01/2024
  Up arrow870 or 800 by 03/01/2024
  Down arrow15,000 or 16,400 by 03/15/2024
  Down arrow4,850 or 5,100 by 03/15/2024

Bulkowski on Right-Angled and Descending Broadening Formations

Updated with new statistics on 8/25/2020. Added Lessons 7/24/2023.

The right-angled and descending broadening chart pattern about ties with the performance of right-angled ascending broadening pattern in a bull market (43% average rise). The break even failure rate is slightly above average, though, at 21%. This is not a chart pattern you'll want to curl up with at night and dream about.

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For detailed information on this chart pattern, read Encyclopedia of Chart Patterns, 3rd edition (#ad) If you click the link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski

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The picture shows a right-angled and descending broadening formation (RABFD).

Right-angled broadening formation, descending
Right-Angled and Descending Broadening Formation

Right-Angled and Descending Broadening Formation: Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 19 out of 39/18 out of 36
Break even failure rate for up/down breakouts: 21%/23%
Average rise/decline: 43%/15%
Throwback/pullback rate: 64%/69%
Percentage meeting price target for up/down breakouts: 65%; 51%

The above numbers are based on 601 samples for upward breakouts and 335 for downward breakouts. See the glossary for definitions.

Right-Angled and Descending Broadening Formation: Identification Guidelines

CharacteristicDiscussion
Price trendCan be up or down leading to the pattern.
ShapeA megaphone tilted down with the top horizontal.
TrendlinesThe top trendline is horizontal, 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.
BreakoutUpward 64% of the time.

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Right-Angled and Descending Broadening Formation: Trading Tips

Trading TacticExplanation Right-angled and descending broadening formation measure rule
The Measure Rule
Measure ruleCompute the height from the horizontal trendline (B in the Measure Rule figure to the right) to the lowest valley (A) and multiply it by the above 'percentage meeting price target.' Add the result to the horizontal trendline (B, upward breakouts) or subtract it from the lowest valley (A, downward breakouts) to get the price target (C).
Intraformation tradeBuy at the bottom trendline when price starts rising and sell or sell short once price turns at the horizontal trendline.
Buy at 3rd touchWhen price touches the bottom trendline for the third time and begins rising, buy.
Partial riseA partial rise works 47% of the time.
Partial declineA partial decline works 75% of the time.
Price trendThe best performing patterns are those with an intermediate-term (3-6 months) price trend leading to the pattern.
Yearly middleFor downward breakouts, the lowest third of the yearly price range performs best. Upward breakouts do best in the middle third of the range.
Volume trendA rising volume trend results in the best post breakout performance.

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Broadening Formations, Right-Angled and Descending: Time Performance

Bull Market Performance Over Decades
Breakout Direction1990s2000s2010s
Up (average)35%53%35%
Down (average)16%13%17%

The table above shows the performance of right-angled descending broadening top chart patterns in bull markets over the last three decades.

Upward breakouts did best in the 2000s but the other two decades held steady.

Downward breakouts did worst in the 2000s and outperformed in the 2010s.

Right-Angled and Descending Broadening Formation: Example

Right-angled and descending broadening formation example

The above figure shows an example of a right-angled and descending broadening formation chart pattern. Price begins a decline at A that leads to the chart pattern. Price bounces between a horizontal trendline on the top and a down-sloping one along the bottom of the chart pattern. A partial decline at B signals an impending upward breakout at C. After the breakout, price makes a strong move upward.

Broadening Tops: Lessons

Below are some of the lessons I learned from trading these patterns over the decades. You can use the Patternz simulator to reproduce the charts in full. I downloaded the data from Tiingo but not all stocks currently trade.

I present the information in slider format, so be sure to click the left or right arrows to view another slide.

Please note: These tips are for swing traders or even scalpers, those who want to trade from low to high or skim off a few bucks, and not for buy-and-hold investors.

Lessons Summary

 

1 / 8
Chart of BMY

BMY (Bristol Myers Squibb, from 14 May 2007 to 5 June 2007). This RABFD had no overhead resistance at least none shown on this chart (except for round number). So price was clear to rise. The stock broke out downward and then busted the breakout when price climbed above the top of the chart pattern. Unfortunately, in this case, the stock didn't rise much before finding the ultimate high and tumbling.

Next slide gives another example of a busted downward breakout.
2 / 8
Chart of CHD

CHD (Church & Dwight from 27 November 2015 to 23 December 2015). This is similar to the prior chart but I wanted to show a second example. This RABFD has little overhead resistance but it forms as part of a multipeak pattern (this chart is actually at the top of an upward move). The stock breaks out downward, reverses, and busts the breakout when it soars out the top. In this example, the stock makes a good climb, but only a portion of it shows here. It peaked at 53.

Be careful taking a position in a stock with a fast rise like that shown at A. This one works, but...

Next: Beware the fast rise!
3 / 8
Chart of BLL

BLL (Ball Corporation symbols is now BALL from 8 August 2016 to 6 September 2016). This chart shows one of two variations of a fast rise where price goes vertical either before the chart pattern (like that shown here) or within it. The rise following the breakout fails and the stock drops. A fast rise for the RABFD and failure happens a lot with this chart pattern.

Next: Another fast rise.
4 / 8
Chart of BAX

BAX (Baxter International from 8 September 2021 to 13 December 2021). This is another example of a fast rise but this rise happens at the end of the chart pattern. Starting from C, the stock makes a sharp move higher to A. I expected it to stall there, and it did, but didn't hang out long. The stock continued higher for a few more points before reversing and closing below the bottom of the chart pattern, busting the upward breakout and likely leading to a failed trade. Notice the fast move at B, suggesting this chart pattern would struggle.

Next; A DBC takes price down.
5 / 8
Chart of CACI

This is a chart of CACI (CACI International from 2 February 2007 to 8 March 2007). The stock gaps lower in an event pattern called a dead-cat bounce. After the drop ended, there wasn't much of a bounce. These types of drops happen from time to time in stocks but what traders need to remember is that if one happens, others can happen again. Those events center around earnings misses. Every three months there's a chance of another big drop (probability of it happening: 26% in 3 months, 38% in 6 months). This DCB triggered an entry on the top of the pattern and price stopped out the trade below the pattern, as shown. Because of the DCB, avoid trading this stock at least for 6 months.

Next: Long uptrend reversal.
6 / 8
Chart of BAX

BAX (Baxter International from 26 April 2007 to 5 June 2007). This is an example of a failed trade that happens after a long uptrend. Although some uptrends last for years, perhaps as long as a decade, they are rare. In this case, how much longer will the uptrend last? Answer, the stock reverses just after entering a trade.

Next: Overhead resistance
7 / 8
Chart of BRC

BRC (Brady Corp, from 22 April 2014 to May 12 20140). Overhead resistance, if you figure out where it will appear, can make or break a trader. In this chart, we see a RABFD appear after a long downtrend. That's not a good start because these downtrends often last longer than one would expect. However, a stock will turn upward sooner or later. In this case, the stock broke out downward, reversed, and soared out the top of the chart pattern. The new breakout upward busted the downward breakout and suggested a good move higher. However, overhead resistance put the brakes on the rise. The stock reversed at the blue line and tumbled.

8 / 8
Chart of BA

BA (Boeing from 6 October 1994 to 20 October 1994). This small RABFD appears to rest on support and makes for a good upward move reaching 60 in 1997.

The End

-- Thomas Bulkowski

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See Also

 

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My novels:  Remember Me book Bumper's Story book Head's Law book
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