Bulkowski’s Right-Angled and Descending Broadening Formations

 
The right-angled and descending broadening chart pattern is the worst performing chart pattern in a bull market. The break even failure rate is high and the average rise is meager. This is not a chart pattern you'll want to curl up with at night and dream about unless you like losing money. For more information see pages 45 to 62 of the book Encyclopedia of Chart Patterns, Second Edition and the following...
Right-angled broadening formation, descending
Right-angled and descending broadening formation

Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 23 out of 23; 13 out of 21
Break even failure rate for up/down breakouts: 19%; 14%
Average rise/decline: 28%; 15%
Throwback/pullback rate: 52%; 51%
Percentage meeting price target for up/down breakouts: 63%; 44%

Identification Guidelines

Characteristic Discussion
Price trend Can be up or down leading to the pattern
Shape A megaphone tilted down with the top horizontal.
Trendlines The top trendline is horizontal, the bottom one slopes downward.
Touches At least two peaks and two valleys should touch their respective trendline.

Volume shape

 Trends upward 54% to 59% of the time with a dome shape. 
Breakout Upward 51% of the time.

Trading Tips

Trading Tactic Explanation

Measure rule

 Compute the height from the horizontal trendline (B in the Measure Rule figure to the right) to the lowest valley (A) and multiply it by the above “ percentage meeting price target.” Add the result to the horizontal trendline (B, upward breakouts) or subtract it from the lowest valley (A, downward breakouts) to get the price target (C).
Intraformation trade Buy at the bottom trendline when price starts rising and sell or sell short once price turns at the horizontal trendline.
Buy at 3rd touch When price touches the bottom trendline for the third time and begins rising, buy.

Partial rise

 A partial rise works 54% of the time.

Partial decline

A partial decline works 63% of the time.
Price trend The best performing patterns are those with an intermediate- or long-term (over three months) price trend leading to the pattern.
Yearly middle For both breakout directions, the middle third of the yearly price range performs best. For downward breakouts, the highest third also performs well.

Volume trend

 A rising volume trend results in the best postbreakout performance.
Throwbacks and Pullbacks Throwbacks and pullbacks hurt postbreakout performance.
Right-angled and descending broadening formation measure rule
The Measure Rule

Example

Right-angled and descending broadening formation example

The above figure shows an example of an right-angled and descending broadening formation chart pattern. Price begins a decline at A that leads to the chart pattern. Price bounces between a horizontal trendline on the top and a down-sloping one along the bottom of the chart pattern. A partial decline at B signals an impending upward breakout at C. After the breakout, price makes a strong move upward.