Chart Lesson 7: Broadening Wedges, Adcending

Broadening Wedges, Ascending

Identification:

Shape:  Looks like a megaphone tilted up with two up-sloping trend lines (higher highs and higher lows).  The top trend line is steeper than the bottom, neither is horizontal.

Touches:  At least 3 touches or near touches on either side.

Premature Breakouts:  Are very rare.  A close below the lower trend line is usually a genuine breakout.

Breakout:  Downward the vast majority of the time.

Partial Rise.  Price touches the LTL, climbs toward the UTL, but fails to touch, price reverses and breaks out downward.

Volume:  Heavy on breakout.

Lowest Formation Low:  Is a natural area of Support.

Once recognizing the Broadening Wedges, Ascending formation:

When the price is going up:

Go Short at the high:  Sell short when the price starts heading down from the top trend line.

If price fails to touch the Top trend line:

Sell the Breakout Down:  Sell short through the breakout down.

When the price is going down:

Go Long at the Low:  Buy after the stock makes it’s turn at the lower trend line.

For Best Performance

• Most broadening wedges breakout downward.

• Trade with the market trend: Select wedges in a bear market with a

Down ward breakout or in a bull market with an upward breakout.

• The lowest failure rates occur with patterns in a bull market and

Up ward breakout.

• Throwbacks and pullbacks hurt performance. Look for overhead resistance or underlying support before trading.

• Breakout day gaps usually help performance.

• A partial rise or decline allows you to enter a trade sooner and usually predicts the breakout direction.

• Select tall or narrow patterns.

• Pick patterns with heavy breakout volume.