Broadening Tops and Bottoms

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WHAT TO LOOK FOR

The Broadening Top pattern is a bearish pattern which is characterized by five small reversals followed by a significant drop in price. The five reversals can be designated with the letters A,B,C,D, and E. Points A,C, and E are consecutive high points after a bullish move and before a bearish move. Points B and D are consecutive low points after a bearish move and before a bullish move.

The Broadening Bottom pattern is also characterized by five small reversals however it is the opposite of the Broadening Top. In the Broadening Bottom, the reversals are followed by an advance in price, not a decline. It is considered a bullish pattern. In this case A,C, and E are consecutive low points after a bearish move and before a bullish move. Points B and D are consecutive high points after bullish moves and before a bearish move.

Key aspects of the Broadening Top Pattern

  1. Points A, C and E should all be successively higher. That is to say, point C should be higher than point A, and point E should be higher than point C.
  2. Point D should be lower than point B.
  3. After the final advance (marked by point E) look for price to decline significantly.
  4. It may be a good idea to wait for price to fall below resistance created by the BD Line for conformation.

Key aspects of the Broadening Bottom Pattern

  1. Points A, C and E should all be successively lower. That is to say, point C should be lower than point A, and point E should be lower than point C.
  2. Point D should be higher than point B.
  3. After the final decline (marked by point E) look for price to rise significantly.
  4. It may be a good idea to wait for price to rise below resistance created by the BD Line for conformation.