Broadening Top Pattern: How to Identify and Trade the Megaphone

The broadening top pattern is a chart pattern in which price makes higher highs and lower lows between two diverging trendlines, after a rise in its classical form. The swings get wider instead of narrower, which is why it is also called a megaphone or expanding formation. Classical charting sees it as the mark of nervous investors near a top.

This guide explains how to identify a broadening top, why it forms, how to trade it, and what our test bench measured when it scanned full price history for megaphones: 959 upward and 533 downward breakouts on the daily chart alone, across stocks, crypto, forex, ETFs, indices and commodities, compared with random dates on the same assets.

What is a broadening top pattern?

A broadening top pattern is a reversal formation made of at least five alternating swing points: three rising peaks and two falling troughs, or the reverse. A trendline drawn across the peaks slopes up; one drawn across the troughs slopes down. The two move apart, so the band expands over time.

Robert Edwards and John Magee described these formations in Technical Analysis of Stock Trends (first edition 1948) as a pattern of tops rather than bottoms, typical of a market that has lost its steady control and swings on emotion. That is the classical reading: the broadening top is a bear pattern that warns of a potential reversal after an uptrend.

Our bench uses a rule a computer can apply without judgment: four to six alternating swing points, a rising resistance line and a falling support line, each point near its trendline. It does not require a prior uptrend, so it measures tops and bottoms together, and records which side breaks. It is also looser than the checklist taught below: because it fits a line through the peaks and another through the troughs, a middle peak or trough may sit slightly off the sequence, as long as the line through the peaks rises and the line through the troughs falls.

Visual representation of the pattern

The two diagrams below are not drawn by hand. They are the median shapes of the clean occurrences our bench found on daily charts across all markets, first with a downward breakout, then with an upward breakout.

Why do broadening top patterns form?

This megaphone forms when buyers and sellers disagree more and more about value. In the classical reading, each rally reaches a new peak because buyers chase price, and each decline goes deeper because sellers take profits or panic. Neither side keeps control for long, so the swings grow.

This is the opposite of a triangle, where the range shrinks as investors agree on a price. In a megaphone, volatility increases and conviction falls. That is why the classical reading treats it as a warning at the end of a long bull run: price still makes new peaks, but it also makes new troughs, which a healthy uptrend does not do.

Key characteristics of a broadening top

Diverging trendlines

The resistance line connects at least two rising peaks and the support line at least two falling troughs. They diverge: the distance between them is largest at the right edge. If the bottom side is flat and only the top side rises, some authors call it a right-angled megaphone.

Increasing swings and volume

Each swing covers more ground than the one before it. Volume can be irregular and can grow with the swings, but there is no fixed volume rule here. What defines it is the expansion of the swings.

Price action and swing highs

The price action alternates: peak, trough, new peak, deeper trough, highest peak. The third peak is the top of the move. At this stage, the failure to hold that last peak and the fall back toward the bottom boundary is read as the first sign of a reversal.

How to identify a broadening top on a chart

To identify a broadening top on a chart, check five things in order:

1. An uptrend before it: the classical version appears near the end of an uptrend.
2. Five alternating swings: three peaks and two troughs, or two peaks and three troughs.
3. Growing swings: each peak above the previous one, each trough below the previous one.
4. Two trendlines moving apart, each touching at least two swings.
5. A breakout: a close beyond one of the two trendlines. Until then, nothing is confirmed.

The last step filters out a lot. Only 9.6% of the megaphone shapes our detector found on daily bars closed outside the lines in time; the rest were never confirmed.

Broadening top vs. megaphone pattern: what is the difference?

There is no real difference in shape. "Megaphone" describes the shape: a narrow end and a broad end. "Broadening top" describes the shape plus the location: a megaphone that forms after an advance. The same shape after a decline is one of the broadening bottoms, seen as a potential bullish reversal.

So every top of this kind is a megaphone, but not every megaphone is a top. Our statistics count both, split by breakout side, which is the part you can act on.

Is the broadening top pattern bearish or bullish?

In theory, it is bearish: it forms at the end of an uptrend and warns of a potential reversal. In practice, the breakout can go either way. In daily data our bench recorded 959 upward breakouts and 533 downward ones: price left through the top more often than through the bottom.

Neither direction showed an edge. After an upward breakout, the asset was up 10 days later 49.8% of the time, against 54.3% for random days on the same assets. After a downward breakout, it was lower 44.4% of the time, against 46.0% for random days. The breakout tells you where price went, not that it will keep going.

Step-by-step guide to trading the broadening top

There are two approaches: trading the swings inside the formation, or trading the breakout out of it. Our bench measures the breakout.

Entry strategies

The breakout entry waits for a close beyond one of the trendlines. A close below the bottom boundary is a sell signal; a close above the resistance line is a buy signal. The swing approach sells near the top of the megaphone and buys near the bottom while it lasts, which works only as long as the swings keep growing.

Stop loss placement

Profit targets and exit rules

The classical target projects the height of the megaphone from the breakout point. Our test uses a target at twice the risk (2:1), with an exit after 100 bars if neither the stop nor the target is hit. With a stop that wide, the 2:1 target is far: trades that reached it took a median of 64 days after a daily upward breakout.

Common mistakes to avoid when trading broadening tops

• Acting on the shape before the breakout: many of the megaphones we detected on daily bars were never confirmed by one.
• Assuming a bearish outcome: in daily data, upward breakouts were more frequent than downward ones.
• Setting a stop too tight inside a shape defined by wide swings: ordinary swings can hit it.
• Ignoring size: on hourly data, the largest ones did worse than the small ones.
• Drawing the trendlines after the fact to fit a story: decide on the five swings before you look at what happened next.

Managing risk with broadening formations

The stop distance is the main issue here. A megaphone is a period of high volatility, and its natural stop is far away. Three rules help: risk a small, fixed share of the account per position; compute the size from the distance to the stop; and accept that the outcome can take weeks, since the median time to the stop was 56 days after a daily upward breakout. If that holding time does not fit your plan, this setup does not fit it either.

Statistical reliability and performance of the pattern

The broadening top pattern is not reliable on its own: no asset class, timeframe or breakout side shows an edge that survives our correction for multiple testing, and after upward breakouts on hourly charts, the move over the next 10 bars was significantly worse than the rest of the market. Most other rows sit close to chance; the main ones are discussed below the table. Here are the main numbers from our test bench.

Downward rows can show far fewer trades than patterns: we skip shorts whose risk exceeds half the entry price, because the 2:1 target would fall at or below zero.

Compare the columns in pairs. On the daily chart, 49.8% of upward breakouts were up 10 days later, against 54.3% of random days on the same assets: no clear edge. The expectancy column compares the 2:1 setup after the breakout with the same entry, stop and target on random dates, in R (multiples of the amount at stake), before costs. The positive values after daily and weekly upward breakouts come from holding up to 100 bars in assets that rose over time; random dates did just as well.

A few rows stand out. The clearest is hourly upward breakouts: 42.1% were higher 10 bars later, against 48.7% for random bars, an average excess return of −0.65% (95% interval −1.04% to −0.32%), rated "Worse than chance"; the 2:1 trade, which holds longer, stayed level with random dates (no clear edge). On US stocks, upward breakouts also lagged their market over the next 10 bars on daily charts (average excess return −0.42%, rated "Weak, below chance"), a gap that passes a simple test but not our correction. On weekly charts the lag (−2.16%) is rated "No clear edge": it does not pass our statistical test. On crypto 4-hour data, upward breakouts reached the 2:1 target 10.9% of the time against 11.4% on random dates, for an average result of +0.08 R against +0.05 R per trade. That gap did not pass our statistical test: it is rated No clear edge, and we do not count it as an edge. The same holds for downward breakouts on 4-hour charts, all markets together, rated No clear edge on the trade (+0.12 R against 0.00 R on random dates). On weekly data, downward breakouts were followed by a decline only 37.5% of the time, against 43.0% for random weeks, a gap rated no clear edge; its trade averaged −0.35 R against −0.40 R, but on only 6 trades, rated Not enough data.

The bench also split hourly occurrences by size. Those detected at our largest swing scale moved in the breakout direction only 40.8% of the time after a downward breakout and 37.5% after an upward one, against 44.7% and 43.3% at the smallest scale. These breakdowns are descriptive, not corrected for multiple testing.

How rare is the pattern?

Rare. In daily data we found one upward breakout every 8,841 eligible bars and one downward breakout every 15,906. For comparison, the symmetrical triangle, its converging opposite, produced 5,641 daily upward breakouts, against 959 for the megaphone. Our rule is strict, so these counts are a floor: it misses some megaphones on choppy markets such as crypto (it found 53% of them at high noise in our recall test on synthetic charts).

The full method is published in our methodology.

Nuances of broadening tops in different market conditions

We also split by the long-term trend. On hourly data, downward breakouts that formed above the 200-bar average (an asset still in a long-term uptrend) number only 16, against 1,251 below it: too few to read whether selling a breakdown against the larger trend does worse. This split is descriptive, not in the tables and not corrected for multiple testing.

In equities, the same long trade on random weeks also gained: +0.45 R on US stocks, against +0.35 R after an upward breakout, so the gain comes from the rise of stocks, not from the breakout. On hourly crypto and forex charts, where that drift is weaker, the expectancy after an upward breakout stayed close to zero (+0.01 R on crypto, +0.05 R on forex); 4-hour crypto, at +0.08 R, is the row discussed above.

Using technical indicators to confirm breakouts

Volume confirmation

Classical analysis wants a breakout on rising volume. On hourly crypto data, upward breakouts with volume above 1.5 times the 20-bar average moved up 10 bars later 40.4% of the time, against 44.2% on normal volume. High volume did not help the move: its average excess return over the rest of the market was −0.79%, against −0.66% on normal volume. The 2:1 trade pointed the same way, at −0.02 R per trade against +0.08 R. This split is descriptive, not in the tables and not corrected for multiple testing.

Momentum oscillators

Another suggested confirmation is a bearish divergence on the RSI or the MACD at the third peak: price makes a higher high while momentum makes a lower high. It is a logical confirmation at a top, but we have not tested it. If you use it, test it on your own data first.

Broadening top vs. broadening wedge

A broadening wedge also has diverging trendlines, but both slope in the same direction. In an ascending broadening wedge, both rise and the upper one rises faster; it is read as bearish. In a descending broadening wedge, both fall and the bottom one falls faster; it is read as bullish. In the top version, the two slope in opposite directions.

Do not confuse a broadening wedge with the rising wedge or the falling wedge, whose lines converge. The diamond pattern starts as a megaphone and ends as a triangle: the range first expands, then contracts. This top and the diamond both begin with expanding swings.

Broadening top case studies

Here are two real megaphones our bench found on daily crypto charts, told in detail with their actual outcome. The cards of the Real examples section show other cases.

Upward breakout that reached the target

On the daily chart, FXS/USDT made rising peaks at 2.191 (October 14, 2024), 2.329 (October 21) and 2.415 (November 12) and falling troughs at 1.880 (October 3), 1.875 (October 17) and 1.602 (November 4). On November 18, 2024 it closed at 2.521, above the resistance. The entry was at that close, with a stop at 1.510, on the far side, and a 2:1 target at 4.543. The pair was 24.87% higher 10 days later and reached the target 16 days after entry: a gain of 2 R.

Upward breakout that hit the stop

This case bends the checklist above, as our looser rule allows: its second trough sits barely above the first. On the daily chart, CVX/USDT made rising peaks at 2.775 (May 8, 2024) and 2.986 (May 25) and troughs at 2.214 (May 1), 2.251 (May 14) and 1.834 (June 13); the last trough is far below the others, so the support line fitted through the three slopes down. On June 17, 2024 it closed at 3.337, above the resistance. The stop, on the far side, was at 1.824, about 45% below the entry. The pair was 2.52% lower 10 days later and reached the stop 81 days after entry: a loss of 1 R.

Tools for finding broadening patterns

This shape is harder to detect automatically than a triangle, because it needs five swings and two fitted trendlines. TradingView lets you draw both by hand. If a scanner flags megaphone patterns for you, check the rule it uses: how many touches, what tolerance, and whether it waits for a breakout.

Summary of trading rules

• A megaphone top has higher highs and lower lows between two lines that move apart, after a rise.
• Wait for the breakout: many of the formations we detected on daily bars were never confirmed.
• Place the stop on the other side of the formation and size the position on that distance.
• On 959 daily upward breakouts, 49.8% were higher 10 days later, against 54.3% for random days.
• No market or timeframe showed an edge that survives our statistical correction; on hourly charts, upward breakouts did worse than chance over 10 bars.

Frequently asked questions about the broadening top