The symmetrical broadening top is called a bullish continuation pattern. This pattern is formed by two symmetrical horizontal lines that are divergent. It looks like an inverted symmetrical triangle or an open triangle. The oscillations in the middle of the two bands of the triangle are consequently becoming more and more sizable. Each line has to touch at least twice for validation.
The symmetrical broadening top will show how the growing nervousness of investors will affect their indecisiveness. If this pattern is not identified right away, this movement may seem totally irregular and then trap many investors.
This formation pattern should be preceded by an upward movement. The pattern is frequently due to profit taking that will lead to the formation of new lows. But, the buying pressure will remain strong and the indecisiveness will dominate.
The target price will be given by plotting the height of the triangle at its beginning on the break point. A different technique is to extend the maximum height of the triangle on the break point.
Here is a graphical representation of a symmetrical broadening top and a symmetrical broadening bottom:
Here are some statistics on the symmetrical broadening top:
– In 53% of cases, there is an upward exit.
– In 75% of cases, the target of this pattern is obtained by acquiring the maximum height of the triangle. With this downward exit, the percentage fell to 64%.
– More than 72% of cases, a downward breakout occurs when the price is into the highest third of its annual range. No bullish breakouts are identified into the lowest third of the annual range.
Be careful of indecisiveness patterns. Bullish breakouts will have more potential.
From the 5th rotation (i.e., the fifth points of contact on either resistance or support), there will be an 80% chance that the exit will occur at the next contact point with the support or resistance of this symmetrical triangle. From the sixth rotation, the percentage rises to 96%.