Broadening Formation (Megaphone) Pattern

The broadening formation itself is neutral — it can break out in either direction. Statistically, downside breakouts are slightly more common, but the pattern should be traded based on the actual breakout direction, not a predicted one.

Broadening formations are relatively rare compared to triangles and flags. They tend to appear during periods of extreme market uncertainty, such as around earnings seasons, economic data releases, or geopolitical events.

Some traders trade the swings between the expanding boundaries, but this is risky. Each successive swing is wider than the last, and reversals can be sudden. Most traders prefer to wait for the breakout.