Descending Broadening Wedge

A Descending Broadening Formation is formed by two diverging downward-sloping trendlines:

• Resistance line: descending, connecting lower highs.
• Support line: descending more steeply, connecting lower lows.
• The price swings expand over time, producing a downward-tilted megaphone.
• Volume often grows as volatility increases.

This formation tilts bearish but can resolve in either direction.

The descending broadening formation reflects increasingly chaotic selling and bargain-hunting:

• Sellers drive prices lower with each swing, but buyers step in earlier each time, widening the range.
• Each rally is met with selling, but bears show signs of losing control.
• The expanding swings represent volatility and indecision.

Resolution comes when:

• Breakdown: Bears push decisively through support, continuing the downtrend.
• Breakout: Bulls absorb selling, producing a strong reversal rally.

This structure often forms during panic phases in downtrends.

Bulkowski’s data:

• Upward break frequency: ~54%.
• Downward break frequency: ~46%.
• Average rise after breakout: ~34%.
• Average decline after breakdown: ~19%.
• Failure rate: ~13%.
• Throwback/pullback frequency: ~60%.

Unlike the ascending version, the descending broadening formation slightly favors bullish outcomes.

Entry: 

• Buy breakout above resistance.
• Short breakdown below support.

Stop loss:

• Longs: below most recent swing low.
• Shorts: above most recent swing high.

Targets: Height of formation projected from breakout. Secondary = prior resistance/support.

Invalidation: Opposite breakout cancels thesis.

• False breakouts: Particularly upward, if volume is weak.
• Swing trading temptation: Range expands, but predicting reversals is unreliable.
• Steep slopes: Very steep descents may signal capitulation, not controlled patterning.

• If no clear broadening behavior (needs expanding swings).
• If pattern duration is too short.
• If breakout occurs without volume confirmation.