Megaphone / Broadening Top Pattern Explained -- with David Moadel
hello friends and welcome to looking at the markets with David Modell gonna go
over a really simple pattern here it's called the megaphone pattern also
sometimes called the broadening top and occasionally it's also called the
broadening bottom so what you want to look for is a series of higher highs and
lower lows now this pattern indicates an increase in volatility so therefore it
could be a good time to put on an iron Condor because you've got again higher
highs lower lows and so you've got volatility increasing in both directions
the upside and the downside and that could be a good time to put on an iron
Condor to capitalize on the increase in volatility also remember it's also
called a broadening top or sometimes a broadening bottom but you don't know or
it's hard to know whether it's bullish or bearish until it breaks out to the
upside which would be bullish or breaks down to the downside which would be
bearish so whether it's really abroad it ends up being a broadening top or a
broadening bottom it's kind of hard to know that until it either breaks out or
breaks down and by the way throughout this video I just want you to know that
if you need more help you can email me anytime my email address is David Modell
at gmail.com I do coach people and I help people put together trading and
investing plans so feel free to email me if you want some help with that
alright let's look at some examples all right well first before we look at an
example these are the patterns and these are megaphone patterns they kind of look
like a megaphone okay we talked about lower lows okay so lower lows right and
then higher highs and again whether it's bullish or bearish whether it ends up
being a broadening bottom or top it's hard to know until it actually
Souder breaks down alright but I will say that most people would consider it
bullish if it escapes from the megaphone to the upside if there's a clear break
if one of the candles breaks and better yet closes if the candle closes clearly
above the top of the megaphone okay that could be considered bullish a lot of
people would and it could be considered a bottom because you finally hit the
bottom and then started turning up and on the other hand if it breaks down
meaning it breaks out to the downside better yet if the candlestick closes
clearly below the bottom of the megaphone pattern that could be
considered bearish and it can be considered a top so be a broadening top
because it reached the top and then started turning around and going down
but again it's hard to know until it actually really breaks out from the top
or bottom here I'll show you what I mean here's an example of it this is from
Trading Viacom I like their charts and you can see the action here you can see
how it's bouncing between you know the lower lows you got your higher highs and
notice it's not perfectly clean like it's it almost never looks like a
textbook does it it doesn't look like the textbook examples all right it's
always a little sloppy you're looking in real life and so you have to apply some
interpretation to it sometimes but you can see it bouncing off the the bottom
and the top bouncing bouncing and here it looked like it was going to possibly
break out but that was a head-fake as they say or at least a false breakout
not really a breakout alright and so you keep going and then hear it clearly
closed above the top of the megaphone above this resistance line here alright
so that that's what and and it's also it also helps if it's a green candle and
it's a that's a pretty sizeable green candle there so it really
closed well above the resistance line here at the top of the megaphone and so
that's pretty bullish a lot of people would say all right so that turned out
to be a broadening bottom according to the chart here ok so again check these
out megaphone patterns broadening top
broadening bottom increase in volatility you might want to consider an iron
Condor putting putting one on there to benefit from the increase in volatility
look for those higher highs and lower lows and check for the breakout or
breakdown to decide or help you decide whether it's bullish or bearish if you
need more help my name's David Modell you can email me I can help you put
together a trading plan or investing plan alright if you like this video
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you