By: Evan Lazarus
X is looking like it’s been building a megaphone top chart pattern on the shorter time frames. The pattern is a relatively rare formation and is also known as a Broadening Top. Its shape is opposite to that of a Symmetrical Triangle. The pattern develops after a strong advance in a stock price and can last several weeks or even months.
A Megaphone Top is formed because the stock makes a series of higher highs and lower lows. The Megaphone Top usually consists of three ascending peaks and two descending troughs. The signal that the pattern is complete occurs when prices fall below the lower low.
Volume in the Megaphone Top usually peaks along with prices. It is usual to see trading volumes increase or remain high during the formation of this pattern. The eventual breakout and reversal can be difficult to identify at the time of its occurrence because volume does not appear unusual.
