Megaphone Pattern

A reader asked me:, is Nifty is making a megaphone pattern?

First of all, i want to explain a megaphone pattern for those who do not know about this pattern. A Megaphone Top also known as a Broadening Top is considered a bearish signal, indicating that the current uptrend may reverse to form a new downtrend. The pattern develops after a strong advance in a stock price and can last several weeks or even a few months. A Megaphone Top is formed because the stock makes a series of higher highs and lower lows.

After a sustained advance, when prices make higher highs as well as lower lows, a suggestion of uncertainty creeps in. Traders are becoming uncertain about the existing up move.

Well, in my view it could be possible but not so sure. It is possible because Nifty is also on a top and moving in a broadening formation. But it is not for sure, because it does not breakdown yet. One should wait until it breakout the resistance level or breakdown the support level.