An indication of potential for a significant surge in technical analysis is often shown by the bullish megaphone pattern. Known by another name, this pattern consists of two diverging trend lines, one sloping downhill and the other upward, giving the chart the appearance of a megaphone.
Price movements are expanding between the two trend lines exhibiting an increasing degree of volatility characteristic of this pattern. It usually develops following a phase of sideways or consolidation trading, indicating that the asset is preparing for a breakout. This is how it functions:
Formation: As prices fluctuate between higher highs and lower lows, the pattern begins to take shape. The shape of a megaphone is produced by price swings that get bigger than the one before.
Volatility increase: The volatility rises as the pattern develops. As price movements increase in magnitude, the market frequently becomes confused and uncertain. One important aspect of the bullish megaphone pattern is its increased volatility.
Breakout: This pattern’s ultimate breakout is its defining characteristic. This breakout normally occurs through the upper trend line for a bullish megaphone. The breakout, which is supported by higher buying interest and trading volume, denotes robust upward momentum.
Target price: Following the breakout, the target price is typically determined by measuring the pattern’s height at its widest point. The possible upside is then calculated by adding this measurement to the breakout point.
This article was originally published on U.Today
Source: Cryptocurrency - investing.com
