A broadening bottom pattern usually forms in a downtrend and potentially signals as a bull market reversal. It has the appearance of a megaphone as the price expands with higher highs and lower lows.
This chart pattern looks like a potential correction before moving lower, but instead indicates a reversal in the previous trend. A broadening bottom is a form of consolidation and forms a support and a new base for the bull reversal.
How to spot a Broadening Bottom Chart Pattern?
The chart below is a graphical representation of the pattern
Confirmation of chart pattern:
A Broadening bottom is established when the price halts prior to making a lower low (after making at least 2 highs and 2 lows) and heads higher taking out the previous high.
The pattern’s psychology:
This chart pattern displays a unique shape; since its primary trait is that it has higher highs and lower lows. This chart pattern shows us a market that is putting an effort to push lower by attracting more sellers in by causing more worries.
The Broadening Bottom is a bullish reversal.
Trade as soon as the price breaks out of the Broadening bottoms.
Enter the trade when the candlestick has closed above the Broadening upper trend line.
Place your stop loss on the other side of the Broadening bottoms, just below its lower trend line.
Before the consolidation of the market, calculate the initial rise in price.
Place the profit target the same distance above the broadening’s breakout point.
The chart below is an example.
No 1: Pole of the pattern
1. Buy order (long entry)
2. Stop loss
3. Profit target distance (same height as the pole number 1)
4. Target aim (Take profit)
Wait for the price to rise above the broadening’s upper trend line.
Enter your trade as soon as the price rises above the broadening s upper trend line.
Place a buy order after the price retests that trend line once the resistance breaks,
The broken resistance now becomes support level.
Place your stop loss below the new support area.
Place your profit target
Calculate the size of the broadening s pole. Place your profit target an equal distance above the broadening s breakout. (Entry of our trade)
The chart below is an example:
No 1: Pole of the pattern
No 2: Area where the resistance line has turned into support
1. Long entry, after the price has bounced off the trend line
2. Stop loss underneath the new support area
3. Take profit distance (same height as pole number 1)
4. Take profit level
An outline of the topic discussed:
The broadening bottom develops in an uptrend in nature.
Getting known with broadening tops and bottoms are more or less the same, except that prices enter the formation after a downtrend .
If the general market is at a turning point (from down to up), prices should reverse course and exit at the top of the chart pattern, but there is no assurance.
Majority of the time 60 % the pattern acts as a reversal of the existing price trend. Upgrading on uncertainty, so make sure for the breakout.
It searches for higher highs and lower lows - the broadening bottom pattern that gives the pattern formation.
A minimum of at least two minor highs and two minor lows touching or nearing the trendlines that outline the pattern is required. Look for plenty of price crossings within the trend lines. The volume pattern is unpredictable, increasing in a rising price trend, and moving back in a declining price trend.