A Broadening Formation is a type of consolidation pattern that may be used to anticipate the possibility of a reversal in the direction of a current trend. When found in an uptrend, it signals a near-term reversal of the market action rather than a continuation of the trend. The pattern is defined by two converging lines, with prices bouncing back and forth between them over time. A price breakthrough from this range usually indicates which direction prices will move next.In general, when looking at any chart pattern it is important to consider both its shape and its position within the overall market context. For instance, if we are seeing broadening formation within an established downtrend, then this would be considered as confirmation that prices are likely to continue moving lower. However, if we were observing this same pattern during an uptrend then it would be seen as less reliable – although still worth considering – as there is more potential for bullish reversals at such times.
