Broadening Formation / Megaphone

The Symmetrical Broadening Formation (classic “megaphone”) has diverging trendlines sloping in opposite directions:

• Resistance line: rising, connecting higher highs.
• Support line: falling, connecting lower lows.
• Price swings expand over time in both directions.
• Volume typically rises with each swing, reflecting mounting instability.

This version looks like a textbook megaphone, widening outward with no directional tilt.

The symmetrical broadening formation represents mounting uncertainty and lack of consensus:

• Bulls push price to new highs, but sellers counter with deeper lows.
• Each side becomes more aggressive, leading to bigger swings.
• Market participants see the same instability: volatility rising without control.

Breakouts:

• Upward: Buyers overwhelm sellers, launching continuation.
• Downward: Sellers overpower buyers, leading to reversal or acceleration.

It often reflects distribution near tops but can appear in mid-trends as well.

Bulkowski’s data for symmetrical broadening formations:

• Upward break frequency: ~49%.
• Downward break frequency: ~51%.
• Average post-break move: ~20% (up or down).
• Failure rate: ~18%.
• Throwback/pullback frequency: ~66%.

This pattern is essentially neutral — true 50/50 — making confirmation essential.

Entry: Buy breakout above resistance or short breakdown below support.

Stop loss: Just beyond the opposite side of the pattern.

Targets: Height of the formation projected in breakout direction. Secondary = key support/resistance levels.

Invalidation: Failure occurs if price reverses and closes back inside after breakout.

• False breakouts: Megaphones are notorious for head-fakes.
• Noise vs. pattern: Many volatile ranges look like broadening formations but lack symmetry.
• Volume clue: Expanding volume with expanding swings supports validity.
• Swing temptation: Traders often try to capture oscillations inside, but volatility makes timing difficult.

• If swings don’t expand clearly.
• If breakout occurs without volume.
• If broader market is range-bound, increasing whipsaw risk.