7 Ways to Tell a Stock Is Headed Down

Learn how to spot bearish chart patterns

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7 Ways to Tell a Stock Is Headed Down

Megaphone Top

9024f4d0 7 Ways to Tell a Stock Is Headed Down

A megaphone top, or broadening top, is a relatively rare formation. As a reverse symmetrical triangle, its shape is opposite to that of the bullish symmetrical triangle. The pattern develops after a strong advance in a stock price and can last several weeks or even a few months.

A megaphone top is formed because the stock makes a series of higher highs and lower lows, and 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.

 


Article printed from InvestorPlace Media, http://investorplace.com/2012/10/7-ways-to-tell-a-stock-is-headed-down/.

©2014 InvestorPlace Media, LLC

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