Bullish MegaPhone Pattern
Exercise: Where would you place your entry, stop loss and profit target? Show exercise
Zinc has created a Bullish Megaphone Pattern at the Daily chart.
We can observe that, this pattern normally leads to a breakout upwards.
Here, the breakout will be at 174 resistance level.
Trade will be started at the bottom of the Megaphone at the lower trend line is major support
We can also confirm a Megaphone, utilizing a Fibonacci Retracement which also points a upward breakout.
Trading the Bullish Megaphone chart pattern
“Wait” for the price to trade above the (broken resistance) and then look to place a buy order on the retest of the resistance line as support (broken resistance now becomes support). The stop loss would go below the new support area and the profit target would remain the same as in the first illustration).
The chart below demonstrates the second way a trader can trade the Megaphone pattern showing
EL1 Long entry after the price retests the resistance as support (in the red shaded area)
SL2 Stop loss goes below the new support level
TP3 Profit target goes the same distance as the height of the pattern, up from the neckline
You can practice where to place entry, exit and take profit according to method 2 in the following exercises:
Exercise 1: Where to place your entry, stop loss and profit target. Show exercise.
A Megaphone pattern is comparatively an extraordinary pattern which occurs occasionally.
Its appearance is adverse to that of a symmetrical triangle.
Megaphone Top forms after a forceful lead in a commodity price which can withstand for weeks or maybe even a few months.
When the commodity makes a sequence of higher highs and lower lows, the formation of a Megaphone Top takes place.
Megaphone top comprises of – three ascending peaks and two descending troughs.
When the prices fall below the lower low, it can be treated as an indication of the pattern being completed.
At the time of the formation of this pattern, we can normally observe the increase or high in the trading volumes.
To find out the possible breakout and reversal when it occurs is not easy as the volume does not show up unusual.