Broadening top (a.k.a. a megaphone pattern [1] ) is technical analysis chart pattern describing trends of stocks, commodities, currencies, and other assets. Broadening Top formation appears much more frequently at tops than at bottoms. Its formation usually has bearish implications. [2]
It is a common saying that smart money is out of market in such formation and market is out of control. [3] In its formation, most of the selling is completed in the early stage by big players and the participation is from general public in the later stage.
Price keeps on swinging unpredictably and one cannot be sure where the next swing will end. Regarding the shares volume, it is very irregular and leaves no clue to the direction of the next move.
In the broadening top formation five minor reversals are followed by a substantial decline.
In the figure above, price of the share reverses five times, reversal point d is made at a lower point than reversal point b and reversal point c and e occur successively higher than reversal point a.
One cannot be sure of the trend unless price breaks down the lower of the two points (b & d) and keeps on falling. In the figure below, Broading Top is confirmed.
A market trend is a perceived tendency of the financial markets to move in a particular direction over time. Analysts classify these trends as secular for long time-frames, primary for medium time-frames, and secondary for short time-frames. Traders attempt to identify market trends using technical analysis, a framework which characterizes market trends as predictable price tendencies within the market when price reaches support and resistance levels, varying over time.
In finance, technical analysis is an analysis methodology for analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. As a type of active management, it stands in contradiction to much of modern portfolio theory. The efficacy of technical analysis is disputed by the efficient-market hypothesis, which states that stock market prices are essentially unpredictable, and research on whether technical analysis offers any benefit has produced mixed results. It is distinguished from fundamental analysis, which considers a company's financial statements, health, and the overall state of the market and economy.
The Elliott wave principle, or Elliott wave theory, is a form of technical analysis that financial traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology and price levels, such as highs and lows, by looking for patterns in prices.
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Double top and double bottom are reversal chart patterns observed in the technical analysis of financial trading markets of stocks, commodities, currencies, and other assets.
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Ichimoku Kinko Hyo (IKH) (Japanese: 一目均衡表, Hepburn: Ichimoku Kinkō Hyō), usually shortened to "Ichimoku", is a technical analysis method that builds on candlestick charting to improve the accuracy of forecast price moves.
In financial technical analysis, the know sure thing (KST) oscillator is a complex, smoothed price velocity indicator developed by Martin J. Pring.
Price action is a method of analysis of the basic price movements to generate trade entry and exit signals that is considered reliable while not requiring the use of indicators. It is a form of technical analysis, as it ignores the fundamental factors of a security and looks primarily at the security's price history. However, this method is different from other forms of technical analysis, as it focuses on the relation of the security's current price to its price history, which consists of all price movements, as opposed to values derived from the price history.
In finance, MIDAS is an approach to technical analysis initiated in 1995 by the physicist and technical analyst Paul Levine, PhD, and subsequently developed by Andrew Coles, PhD, and David Hawkins in a series of articles and the book MIDAS Technical Analysis: A VWAP Approach to Trading and Investing in Today's Markets. Latterly, several important contributions to the project, including new MIDAS curves and indicators, have been made by Bob English, many of them published in the book.