The Broadening Wedge Descending pattern forms when a pair price makes lower lows (1, 3, 5) and lower highs (2, 4), forming two downward sloping lines that expand over time (kind of like a pointed down megaphone shape). This pattern may form when large investors spread out their selling over a period of time, and the Breakout can occur in either direction.
When the initial selling occurs, other market participants react to falling price and jump on the bandwagon to participate. Then the value investors begin to sell, believing the price has not fallen enough, which spurs the original large investor to resume selling again.
Trade idea
If price breaks out from the bottom pattern boundary, day traders and swing traders should trade with a DOWN trend. Consider selling the pair short or buying a put option at the downward breakout price level. To identify an exit, compute the target price by assessing the difference between the pattern’s lowest high (2) and the breakout level. That is the pattern height. The target price can be calculating by subtracting the pattern height from the downward breakout level, which is the last low touching the bottom line.
To limit potential loss when price suddenly goes in the wrong direction, consider placing a stop order to buy back a short position or sell a put option at or above the breakout price.
Tickeron’s AI works to analyze patterns in order to give you the chance to make better trading decisions. Our tools, like the Pattern Search Engine and Real-Time Patterns, provide you with the knowledge you need to track stocks, ETFs, Mutual Funds, FOREX, and cryptos.
Statistics are what make Tickeron’s AI so powerful. Here’s how we analyze these patterns:
Tickeron tracks and backtests the stats for each cup-and-handle pattern detected by our AI, and provides the user with this data so that they can make an informed trade, having weighed the risks and possibilities.
The investor obtains statistics on the patterns that are detected by AI and what percentage of them hit their target price. They are then presented with the potential gain or loss that the investor would have encountered if they would have traded the pattern.
With just a few clicks, the user sees the following:
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How many total Broadening Wedge Descending patterns AI recognized
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How many of those patterns reached the target price
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The average return if the pattern was successful versus if it failed; and,
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The average return of all patterns recognized.
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A list of all of the securities (including cryptocurrencies) that the AI has identified over time in a Broadening Wedge Descending pattern.
The AI also has different “confidence levels” to describe how likely it is that a pattern will play out, and the user can adjust confidence levels higher or lower to obtain different statistics.
For example, if Tickeron’s AI is asked to detect all Broadening Wedge Descending Patterns with a 60%+ confidence level and a greater than 5% distance to the target price (potential profit), then the user would discover that Tickeron’s AI has discovered 496 patterns meeting that criteria, having searched about 4000 stocks, around 10,000 ETFs, hundreds of FOREX and cryptocurrencies. The user would also discover that 3,744 of those patterns reached the target price.
If you’ve never seen technology like this before, it’s because it has never been available to retail investors in this format. The idea is to provide retail investors with technology and tools to enable trading with massive amounts of data and analysis. The end result is arming retail investors with a high-powered, virtual research assistant: Tickeron’s Artificial Intelligence.
Click the link to see statistics for other confidence levels and distance to target (potential profit) for this pattern: https://tickeron.com/app/patterns/patterns/pattern/8