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by Jayanthi Gopalakrishnan
Broadening formations, also known as broadening triangles, are defined as a series of higher highs combined with lower lows. Trading volume tends to expand during the widening phase, and signal a breakdown of the current pattern.
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Jayanthi Gopalakrishnan
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BROAD FORMATION
Broadening Formations
05/22/00 05:43:09 PMby Jayanthi Gopalakrishnan
Broadening formations, also known as broadening triangles, are defined as a series of higher highs combined with lower lows. Trading volume tends to expand during the widening phase, and signal a breakdown of the current pattern.
Position: N/A
| The broadening formation can be either a consolidation (correction period), or a complete reversal. You will not come across broadening formations often, but when you do they signify important support and resistance levels. The upper trendline acts as a resistance level while the lower trendline acts as a support level. Generally when you see this formation starting, extend both trendlines to determine which way prices will move. A break in any of the trendlines would indicate an entry point for a trade. |
| The simplest method to utilize broading formations is to go long when prices turn away from the support line. Always place a stop 1/8 to 1/4 point above this line. You can go one step further by placing a price target for exiting your position. Take the difference between the high and low point and add this difference to either the high or low. |
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| The DJIA weekly chart showing a broadening top formation. |
| Graphic provided by: MetaStock. |
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