A broadening formation is a type of consolidation pattern that can be used to predict the likelihood of a reversal in the direction of a current trend. When found in an uptrend, it indicates a near-term reversal of the price action rather than a continuation of the trend.

The broadening formation occurs when price fluctuation produces a series of higher highs and lower lows that steadily widen over time and are generally thought to be found only in topping formations where they are thought to be the result of unrealistic bullish investor expectations.

A broadening formation, also known as a megaphone pattern, is a technical analysis chart pattern characterized by increasing price volatility. It forms when the market creates higher highs and lower lows, resulting in a shape that widens over time. This pattern reflects market indecision and heightened investor emotions, often driven by uncertainty or conflicting market forces.

Broadening formations typically occur during periods of high volatility and may signal a potential trend reversal or continuation, depending on the broader context. Traders use support (lower trendline) and resistance (upper trendline) levels within the pattern to identify potential entry and exit points. However, due to its unpredictable nature, trading within this formation requires careful risk management and confirmation from additional indicators or patterns.