What it looks like
Each swing high is higher than the last and each swing low is lower, so lines through them spread apart to the right. At least two highs and two lows are needed to see it. The breakout is a close above the most recent swing high.
What it means
The swings were getting wilder in both directions, which is a sign of a nervous market where neither side keeps control. A close above the last high means buyers have cleared the latest swing, but it is a sign of nervous trading more than a clean signal. That is why this pattern deserves smaller size than a tidy flag or triangle.
How to trade it
- 1
Draw lines through the widening highs and lows.
- 2
Confirmation: a candle closes above the last swing high.
- 3
Entry: buy that close, with reduced size.
- 4
Stop: back inside the range. Example on gold: last high 4,070, close above at 4,074. Buy at 4,074, stop at 4,058 back inside, a 16 point risk.
- 5
Target: a modest multiple of the stop, such as 1.5 to 2 times, since the pattern gives no measured target.
A close back below the level that broke, the last swing high.
Where it works best
Around major news and very volatile sessions on indices and gold, where megaphones tend to form; even there, small size is sensible.
WickSpeak spots broadening breakouts automatically and names them on the candles that made them. The note explains what it is, why it calls for caution, how to trade it and the close that proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Trading it with normal size as if it were a reliable pattern.
- Placing the stop at the far side of the megaphone, which can be very wide.
- Expecting the break to trend smoothly when the market has been swinging wildly.
Related patterns
Questions traders ask
What is a broadening pattern?
A pattern where highs get higher and lows get lower, so the range widens like a megaphone. It shows a nervous, volatile market.
Is a broadening formation bullish?
Not by itself. A close above the last high is a bullish break, but these fail more often than tidy patterns, so trade them with caution.
Why trade it small?
The wild swings mean breakouts often reverse. Smaller size keeps the damage limited when that happens.
What proves it wrong?
A close back below the high that broke. The breakout has failed and the wild range is continuing.