Proper Identification Of A Right-Angled Ascending Broadening Pattern Formation

GuidelinesShape The overall shape resembles a megaphone. This is not definite and is not precise, rebember you are trading patterns but they can't be mathematically precise or coded. It is one of the only areas where the human eye have an advantage over a computers code. Try to code a megaphone shape and see what happens. It CAN be done but is quite hard to do it. Trend Lines This pattern is constituted of two trends lines: * The upper upward sloping trend line; * And the horizontal bottom support line. These two lines give name to the shape. They must me touched at least twice to validate the pattern and must fill the white space equally so its conditions are met. Volume The volume here has no big meaning but it can be used as a confirmation of the pattern. It is usually sloping upward and U shaped, especially in the last third of the pattern. But do not take this seriously, it is just and indication, a help better saying, to aid you in confirm the pattern IF in doubt. But, I strongly suggest that if IN DOUBT, just leave it, take a look somewhere else and then you might be able to find something more clear. Breakout We can split this section in three different types of breakouts: * Premature breakouts; * Downward breakouts; * Price movement before breakout. Premature Breakout This formation, fortunately, does not present mane premature breakouts (premature breakouts are the one that close outside the formation boundary but return before the formation ends. Downward breakouts This usually appears in this formation with a rise in volume. If this happens, that you are inclined to take the trade since this pattern most of the times, behave quite accordingly to our criteria in a bear market. Price movement before breakout It is widely known that stocks can behave in three different ways: they can go up, go down or just move sideways for quite a long time. Sometimes I believe that moving sideways can be the worst thing for a inexperienced trader since, at least, when it moves down, you close your position. Sideways, you might hang around in the hopes of the stock to make the move as soon as you close your position. That is why I recommend a TIME STOP on all your positions. Having said that, this pattern can sometimes be valid and the stock still behave quite erratically for a long time either up, down or sideways but bever breaking out the of the pattern. So, you need to be patient and keep an eye on it.