What it is
The Broadening Formation (also called a megaphone pattern) is a chart pattern characterized by expanding price swings — higher highs and lower lows diverging outward. Unlike triangles that converge, this pattern widens over time.
The pattern reflects increasing volatility and disagreement between buyers and sellers. Each swing is more extreme than the last as the market oscillates with growing intensity. Broadening formations often appear at market tops when emotions are running high and price action becomes erratic.
The psychology
The Broadening Formation reveals a market losing its composure. Unlike orderly trends or tidy consolidations, this pattern shows escalating conflict. Each rally makes a higher high, and each selloff makes a lower low. Neither bulls nor bears can establish control.
The expanding swings reflect emotional extremes. Buyers rush in on breakouts to new highs, only to be overwhelmed by sellers who push to new lows. Then buyers stampede back. The amplitude grows because each failed breakout creates trapped traders who fuel the opposite move.
This pattern is often associated with distribution — smart money selling into increasing volatility while the crowd whipsaws between greed and fear. Resolution typically comes as a breakdown, though upside breakouts do occur.
Identification
- 01Expanding price range — At least two higher highs and two lower lows that diverge
- 02Diverging trendlines — Upper trendline slopes up, lower trendline slopes down
- 03At least five swing points — Needs enough touches to confirm both trendlines
- 04Increasing volatility — Each swing is larger than the previous
- 05No converging lines — If lines converge, it's a triangle, not broadening
- 01Appears after extended uptrend — More likely a distribution top
- 02Volume increases with each swing — Confirms growing emotional participation
- 03Fifth touch of a trendline — Highest probability trade setup
- 04Bearish divergence on oscillators — Momentum weakening despite higher highs
- 01Only two swings — Needs at least five points for confirmation
- 02Trendlines converge — That's a triangle pattern
- 03Appears in a calm, low-volatility market — Pattern requires emotional extremes
- 04Very short duration — Pattern needs room to develop multiple swings
Execution framework
Conservative: Wait for a confirmed break of either trendline with follow-through.
Aggressive: Trade the swings within the megaphone, buying lows and selling highs.
For breakdown: Above the last lower high within the formation. For breakout: Below the last higher low. The widening swings make stops wider, so position size accordingly.
Measured Move: Height of the formation at its widest point, projected from the breakout/breakdown. T1: 50-75% of the measured move for conservative exits. These patterns can produce large moves.
Aim for minimum 1:2. The wide stops from the expanding range require disciplined position sizing.
Context matters
Broadening Formations are among the most challenging patterns to trade because they represent increasing chaos, not order. Edwards & Magee considered them characteristic of market tops. The key is waiting for a decisive break of one boundary with volume confirmation.
- 01At the top of a multi-month or multi-year uptrend
- 02After a period of increasingly erratic price action
- 03Five clear touches of the diverging trendlines
- 04Breakdown below the lower trendline on high volume
- 05Bearish divergence on RSI or MACD
- 06On daily or weekly charts
- 01In the middle of a range without trend context
- 02On very short timeframes where swings are noise
- 03With only 2–3 swing points (insufficient confirmation)
- 04Low volume throughout the pattern
- 05If the trendlines are not clearly diverging
- 06In a strong trend where a simple pullback is more likely
These are tricky to trade - volatility expands both ways. Best used to identify when NOT to trade rather than when to enter.
Compare the full pattern set
Use the library to compare similar structures before deciding what the chart is actually building.