DJIA Reverse Symmetrical Triangle Inside A Giant Megaphone Formation

Megaphone formation is similar to reverse symmetrical triangle pattern. Megaphones forming at the top of an uptrend are also known as broadening tops. Those forming at the end of downtrends are known as broadening bottoms.

Megaphone or broadening formation shows higher highs and lower lows. The huge red magaphone shown on the chart above is a broadening top. The smaller green megaphone or reverse symmetrical triangle forms the lower portion of the red megaphone. A very rare formation in charts.

The bears were disappointed when the long legged doji managed to close above the lower support of the giant red megaphone and the lower support of green reverse symmetrical triangle. With this closing the doji declares that there is no confirmation for both megaphones.

If the doji cannot stop further weakness next week then both megaphones will be confirmed if the index breaks the red 200 EMA support line and the 23.6% Fibonacci retracement support level. Next support will be the blue 200 SMA.

However, if the G7 finance ministers meeting ends with good news then the green megaphone may start to form a mirror triangle that results is a diamond pattern as shown in the chart below. Diamond patterns are also typically bearish but, strictly speaking could also be a continuation pattern.

Depending on how the market behaves in the coming weeks and months there may be a potential to form a giant red diamond pattern. Then will it be a top or a continuation pattern? We cannot cross that bridge until we come to it.

Stay alert and nimble in case the megaphone confirmation dash hopes and dreams of sparkling diamonds into an avalanche of falling rocks.