U.Today – is slowly but surely getting back on its feet, with the price gaining some stability around $56,000. Unfortunately, the buying power is non-existent, and the market clearly needs another push. The so-called “bullish megaphone” pattern could be the answer.
A common indicator of significant upside potential in technical analysis is the bullish megaphone pattern. Known by another name, this pattern consists of two diverging trendlines, one down and the other up, giving the chart the appearance of a megaphone.
Price movements extend between two trend lines, showing the increasing degree of volatility characteristic of this pattern. It typically develops after a sideways or consolidation trading phase, indicating that the asset is preparing for a breakout. Here’s how it works:
Formation: As prices fluctuate between higher highs and lower lows, a pattern begins to form. A megaphone shape is formed as price swings become larger than the previous ones.
Increase in Volatility: Volatility increases as the pattern develops. As the size of price movements increases, the market often becomes confused and uncertain. One essential aspect of a bullish megaphone pattern is its increased volatility.
Breakout: The final breakout of this pattern is its defining feature. This breakout usually occurs through the upper trendline of a bullish megaphone. A breakout that is supported by higher buying interest and trading volume indicates forceful upside momentum.
Price Target: After a breakout, a price target is typically set by measuring the height of the pattern at its widest point. The possible upside is then calculated by adding that measurement to the breakout point.
