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Megaphone Top Chart Pattern
A Megaphone Top also known as a Broadening Top is considered a bearish signal, indicating that the current uptrend may reverse to form a new downtrend.
A Megaphone Top is a relatively rare formation and is also known as a Broadening Top. Its shape is opposite to that of a Symmetrical Triangle. The pattern develops after a strong advance in a stock price and can last several weeks or even a few months.
A Megaphone Top is formed because the stock makes a series of higher highs and lower lows. The Megaphone Top usually consists of three ascending peaks and two descending troughs. The signal that the pattern is complete occurs when prices fall below the lower low.
Volume in the Megaphone Top usually peaks along with prices. It is usual to see trading volumes increase or remain high during the formation of this pattern. The eventual breakout and reversal can be difficult to identify at the time of its occurrence because volume does not appear unusual.
The target price provides an important indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful, however you must consider the current price and the volume of shares you intend to trade.
Criteria that Supports
Volume in the Megaphone Top usually peaks along with prices. A strong volume spike on the day of the pattern confirmation is a strong indicator in support of the potential for this pattern.
The creation of the pattern reflects a period of time when bulls and bears are battling to gain control of the stock. The pattern occurs after the bulls have been charging and driving the stock price appreciably higher. During the formation of the Megaphone Top, however, bears are exerting increasing influence on the stock and causing it to set a series of lower lows. The increasing volatility eventually creates a sense of uncertainty, leads to profit-taking, and deters some of the bulls from making any further commitments. The bears eventually triumph.
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TABLE OF CONTENTS
Candlestick and Chart Patterns (15 Days)
7 Most Important Candlestick Chart Patterns
- Gap Down Chart Pattern
- Gap Up Chart Pattern
- Gravestone Short-term Chart Pattern
- Hammer Candle Stick Chart Pattern
- Hanging Man Short-term Stock Chart Pattern
- Inverted Hammer Stock Chart Pattern
- Shooting Star Candle Stick Pattern
Top 2 Bearish Chart Patterns
Top 6 Bullish Chart Patterns
- Engulfing Line (Bullish) Chart Pattern
- Exhaustion Bar Chart Pattern (Bullish)
- Inside Bar Chart Pattern
- Island Bottom Chart Pattern
- Key Reversal Bar (Bullish) Chart Pattern
- Two Bar Reversal (Bullish) Chart Pattern
Indicators & Oscillators (12 Days)
Bullish or Bearish Indicators
Bullish or Bearish Oscillators
- Bollinger Bands Oscillator
- Commodity Channel Index (CCI)
- Fast Stochastic Oscillator
- Know Sure Thing (KST) Oscillator
- Momentum Oscillator
- Moving Average Convergence/Divergence (MACD) Oscillator
- Relative Strength Index (RSI)
- Slow Stochastic Oscillator
- Williams %R Oscillator
Classic Chart Patterns (29 Days)
Bearish Classic Chart Patterns
- Continuation Diamond (Bearish) Chart Pattern
- Continuation Wedge (Bearish)
- Descending Continuation Triangle Chart Pattern
- Diamond Top Chart Pattern
- Double Top Chart Pattern
- Downside Break Chart Pattern – Rectangle
- Flag Bearish Chart Pattern
- Head and Shoulders Top Chart Pattern
- Megaphone Top Chart Pattern
- Pennant Bearish Chart Pattern
- Rounded Top Chart Pattern
- Symmetrical Continuation Triangle (Bearish)
- Top Triangle/Wedge Chart Pattern
- Triple Top Chart Pattern
Bullish Classic Chart Patterns
- Ascending Continuation Triangle Chart Pattern
- Bottom Triangle Or Wedge Chart Pattern
- Continuation Diamond (Bullish) Chart Pattern
- Continuation Wedge Chart Pattern (Bullish)
- Cup with Handle Bullish Chart Pattern
- Diamond Bottom Chart Pattern
- Double Bottom Chart Pattern
- Flag Bullish Chart Pattern
- Head and Shoulders Bottom Chart Pattern
- Megaphone Bottom Chart Pattern
- Pennant Bullish Chart Pattern
- Round Bottom Chart Pattern
- Symmetrical Continuation Triangle Bullish
- Triple Bottom Chart Pattern
- Upside Breakout Chart Pattern – Rectangle
Best Trading Theories (4 Days)
- Basics of Dow theory trading strategy forecasts
- Motive (Impulse) Waves
- Corrective Waves
- Wyckoff Chart Reading
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