The Broadening Formation (also called the Megaphone Pattern or Expanding Triangle) is a bearish reversal chart pattern where price makes progressively higher highs and lower lows — the opposite of a symmetrical triangle. The two bounding trend lines diverge outward like a megaphone. Each swing is larger than the previous, signaling rising volatility, increasing indecision, and distribution at market tops. When price fails to make a new high and breaks below the lower boundary, the bearish reversal is confirmed.

How to Identify

• Forms at the top of an uptrend — rarely appears at bottoms
• Upper resistance line rises (higher highs) — sloping upward from left to right
• Lower support line falls (lower lows) — sloping downward from left to right
• Both lines diverge from a common point on the left (the "mouth" opens to the right)
• Each successive swing covers more ground than the previous — expanding amplitude
• Minimum three highs and three lows touching their respective boundary lines
• Volume is typically erratic and elevated — unlike the contracting volume in triangles
• Bearish signal triggered when price fails to reach the upper boundary and closes below the lower boundary
• Price target: measure the widest height of the formation and subtract from the breakdown point

Why It Matters in Current Markets

The broadening formation is particularly relevant in volatile, news-driven markets — such as AI-led rallies, macro uncertainty environments, or Fed policy pivots. The pattern captures the increasing disagreement between bulls and bears, with each side winning temporarily before losing ground on the next swing. The expanding swings often coincide with elevated VIX readings.

For options traders, the broadening formation is ideal for straddle or strangle strategies during the formation itself (IV often spikes with each new swing extreme), and then for put purchases or bear spreads on the confirmed breakdown. The prior lower support line often acts as a pivot on any bounce after breakdown.