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Right-angled broadening Formations

Figure 3 (top left) shows a "right-angled," ascending broadening formation. The top tnendline slopes upward (ascends) and the bottom trendline   is horizontal or nearly so. Like other broadening patterns, the breakout can occur in any direction, but this pattern usually reverses the trend- The   figure shows this, as prices rise into the pattern and exit out the bottom.

Alter two touches ot each trendline occur, look for a partial rise or decline. The late-May decline in Figure 3 does not show a partial   decline.   Why? Because the pattern at that point did not have at least two minor touches of each trend line.

Price touches at point 1 but it is not a minor high or low, so it does not count as a touch. Point 2 is valid, as is point 3. Only after price touches point 3 can you draw the horizontal trendline. By that time, the three touches on the top connect an up-sloping trendline. The partial rise that   follows correctly predicts a downward breakout. Figure 4 (bottom left) shows a descending rightangled broadening pattern.

The top trcndline is horizontal and the bottom one slopes down. Price touches the bottom trendline, bounces up but does not come close to or touch the top trendline before retracing its gains. This PR predicted a downward breakout. As is the case with this example, the descending,   right-angled broadening pattern usually acts as a price reversal. In the descending pattern, partial uses worked just 58 percent of the time and   partial declines worked 78 percent of the time in descending, right-angled broadening pat terns.

Broadening wedges

Figure 5 (top right) shows a descending broadening wedge, which consists of two down-sloping trendlines (think of a downward-tilting megaphone). The rules for wedges are the same as other broadening patterns: There must be at least two minor high touches of the top trendline   and at least two   minor low touches of the bottom trendline. Only then is the pattern valid and only then should you look for a partial rise or   decline.

The pattern usually acts as a continuation, rather than a reversal, of the prevailing price trend. However, the two wedges shown in Figure 5 are   reversal patterns. In the August pattern, prices   climbed into the pattern and broke out to the upside, but the overall trend (except for   a few days   after the breakout) was downward after the pattern. Prices in the October wedge were trending downward into the pattern and exited out its top.   The trend after the pattern ends is predominantly upward.

In the August pattern example, the slight dip in early September was not a partial decline. Price in a PD must start from the top trendline, bow downward (without coming close to or touching the bottom trendline) and rejoin the top trendline. In this case, price leaves the bottom   trendline, not the top one.

In the October pattern, the first partial decline is a failure because price does not breakout upward immediately after touching the top trendline. Instead, price drops down again and finally shoots exit the top.

A partial decline correctly predicts an upward breakout 76 percent of the time. Not enough samples were found for partial rises in   descending broadening wedges.

Figure 6 (p. 39) shows an ascending broadening wedge. Both trendlines slope upward and minor highs and minor lows touch each   trendline at least twice. The January partial decline failed because price did not break out to the upside - it touched the top trendline,

then reversed.

The partial rise does better when it leaves the bottom trendline, bounces up and then plunges through the bottom trendline. A PR   correctly predicts a downward breakout 84 percent of the time.