Commence with gratitude to The Most Benevolent, The Ultimate Knower for His Unusual Kindness and Ultimate Blessings
A Short Lesson in Trading The Patterns.
A Broadening Top is strong chart reversal pattern. It is contained of at least three peaks at consecutively higher levels and, in between them, at least two bottoms with the second bottom lower than the first. Broadening tops take place normally in the later part of over extended bull markets (or rallies). When a broadening top is being formed, there will be irregular trading activity with a number of volume spikes. Trend of volume is an important factor in this pattern, like many others. Downward volume offers the best performance, regardless of the breakout direction.
Each reactive low off the respective high comes with high volume and turnover, thus giving the impression that the uptrend is coming to an end. However, after each sell off, a rally will begin that will carry the prices to higher highs. As a result making it hard to sell the break of new lows, or buy the break to new highs. However, for an experienced eye, it offers great trading opportunities. For an experienced option trader, it is one of the best trading opportunities.(Click on the chart to enlarge)
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