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Trading and Investment Terms

Broadening Top

A broadening top is a bullish reversal pattern. 

The pattern is formed by two divergent lines which are horizontally symmetric. 

It is therefore a reverse symmetrical triangle. 

 

The oscillations between the two triangle terminals are therefore becoming increasingly large. 

Each line must be touched at least twice to be validated.

 

The broadening top reflects the growing nervousness of investors and also their indecision. 

 

If the chart pattern is not spotted quickly, the movements may appear random and thus trap many investors.

 

Here are some statistics on the symmetrical broadening top:

  •  In 53% of cases, there is an upward exit.
  •  In 75% of cases, the target of this pattern is obtained by acquiring the maximum height of the triangle. With this downward exit, the percentage fell to 64%.
  •  More than 72% of cases, a downward breakout occurs when the price is into the highest third of its annual range. No bullish breakouts are identified into the lowest third of the annual range.

A broadening top is a rally to a new high, weakness to an intermediate support level, a second rally to a higher high on increased volume and decline through the intermediate support level, the third rally to a higher high on strong volume pursued by an ultimate fall down.

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