In this video, I will be taking a look at the Megaphone Pattern or Broadening Pattern as well as give two real-life examples of textbook trade and failed trade using this pattern. The Megaphone Pattern indicates a period of indecisiveness both from the seller and buyer forming an increase in volatility over the period of formation, in the case of a megaphone top buyers are prepared to keep buying the top higher and higher, and typically lends itself to being a bearish pattern play on the breakout, in the case of a megaphone bottom we see the opposite, whereby the sellers are prepared to keep selling the price lower and lower, and typically lends itself being bullish on the breakout.
Caution must be noted with this pattern - giving the indecisiveness nature of the pattern the breakout can occur in any direction, however there are some basic rules where bearish or bullish breakouts must be assumed first. A well thought out strategy will help determine this, and I give a perfect textbook classic example of such a well thought out strategy.
101 Basics 0:47
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