💥Broadening formation, also known as megaphone or expanding triangle, is a chart pattern characterized by two trend lines that are diverging from each other. The top trend line represents the resistance level, while the bottom trend line represents the support level. The pattern is considered a reversal pattern as it suggests that the previous trend is coming to an end, and the price is likely to move in the opposite direction.
💥Broadening formation can be identified by looking for at least two highs and two lows that are spaced out, creating the diverging trend lines. The price tends to move back and forth between the trend lines until it breaks out above or below one of the trend lines. Traders can use this breakout as a signal to enter or exit a trade, depending on the direction of the breakout.
💥Diamond, also known as a rhombus, is a chart pattern that occurs when the price is trading within a range and forming a diamond shape. The diamond pattern is formed by four trend lines that connect a series of higher highs and lower lows, creating the diamond shape.
💥The diamond pattern is considered a continuation pattern, meaning that the previous trend is likely to continue after the pattern is completed. Traders can identify a diamond pattern by looking for a series of higher highs and lower lows that are forming the diamond shape. The price tends to break out of the pattern in the direction of the previous trend, and traders can use this breakout as a signal to enter or exit a trade.
💥It's important to note that while chart patterns can be useful in identifying potential trading opportunities, they are not foolproof and should be used in conjunction with other technical indicators and analysis to make informed trading decisions.
💥Broadening Formation is characterized by the widening of the price range as it forms, similar to the swaying of a ship. As shown in the picture above, this pattern is typically classified as a Continuation pattern, but due to its erratic nature, it may occasionally result in reversal patterns instead of continuation patterns, as shown in Figure 2.
When the two patterns, Triangle and Broadening, are combined, they create another pattern called Diamond. However, this pattern is a reversal pattern rather than a continuation pattern.