Useful Information Of A Broadening Bottom Pattern For The Stock Market – Part 1

Useful Information Of A Broadening Bottom Pattern For The Stock Market Part 1

Continuation or Reversal

Usually, a broadening bottom formation will act more as a reversal than a continuation and that is something you should pay attention to. It can happen that once you are in a trade, is continues all the way up (or down) to meet your price target, but that is not common. If you want to have the edge in the trade, then take your profits as soon as possible and go home.

Average Rise Or Decline

Here there are no big surprises: the broadening bottom pattern can either break upward or downward. You can trade both, but when you do, try to capture the overall market condition and trade along with it. So, if the stock is trending upward, try to trade a broadening bottom that is breaking upward. On the other hand, if the stock is going down, try to trade a downward breakout. Just go with the flow and you will enhance your chances of success.

Change After Trend Ends

This part here is to show how you can trade a broadening bottom pattern both ways: either upward or downward. For example, if the stock makes a breakout of the pattern upward, after it reaches the price target, it tends to pullback by 50%. So, if you can pinpoint and use smart position sizing, you could trade all the way up and then half way down to increase your profits. Although this is possible, it is not recommended since it is not easy to pinpoint that reversion point.

Busted Pattern Performance

When trading market, in general, you should be aware of busted patterns and formations. Why? Since everyone was expecting the stock to behave in one way, when it does bot, it gets everyone off guard and all the stops that were beautifully arranged start to bust thus making the move even more explosive. So if you see a breakout of a broadening bottom that does not continue the way it should by more than 5%, maybe it would be a smart idea to trade the other way around. I know some traders that, when that happens, go twice as big in that position since it is, usually, a big explosive move.

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