May 17

This Is One Overlooked Chart Pattern That Can Increase Your Profit

You have drawn your trendlines, support and resistance zones. You have scanned for the common chart patterns and none of them are present. You think that there is no opportunity and are about to move on to the next chart.

Hold on. Chances are, you have not considered this chart pattern. You are not the only one as this chart pattern is often overlooked – the broadening formation chart pattern.

Cause

Market participants are split in their evaluation of the stock. This results in heightened volatility, causing prices to range greatly in this chart pattern before the bulls or bears take full control.

Spot It Right

While most chart patterns display converging prices, this displays diverging prices as shown in the examples below.

#1 Bullish Broadening Formations:

Characteristics:

  • High volatility
  • Diverging trendlines
  • Decent volume on breakout important (to justify accumulation)

 

 

#2 Bearish Broadening Formation:

Characteristics:

  • High volatility
  • Diverging trendlines
  • High volume at the market tops

 

Show Me The Money

#1 Breakout Trade

  • Watch for price to break the broadening formation line
  • Enter your position according to the direction of the breakout the next session
    • If you are trading using the hourly chart, enter the trade an hour later
    • If you are trading according to a daily chart, enter the trade on the next day3

 

 

#2 Pullback Trade

  • Watch for price to break the broadening formation line
  • Wait for the price to pull back to the area near the line and enter your position the next session
    • If you are trading using the hourly chart, enter the trade an hour later
    • If you are trading according to a daily chart, enter the trade on the next day

 

 

Conclusion

Broadening formations exist in times of high volatility. Many traders fear volatility and see it as a negative because they are under equipped. You are different as you know how to emerge successful by adding this chart pattern into your trading arsenal.

Here’s What You Can Do To Improve Your Trading Right Now:

#1 Join us in our Facebook Group and share your questions as we learn and grow.

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#3 Grab a front row seat and discover how you can expand your trading arsenal in our FREE courses (for a limited time only).

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