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11/02/2022 |

TrendSpider Software Update: Broadening Formation Stock & Crypto Scanner

Hello, traders, and welcome to yet another TrendSpider software update. In this update, we bring some really powerful new scanning functionality to the platform: Scanning for Broadening Formations. Details after the jump!

Software Update: Broadening formation scanner

What Is A Broadening Formation?

Traders of all kinds utilize chart patterns in order to identify both the current trend of a market and, also, where price could be headed next. Some patterns suggest continuation in the direction of the previous trend. Others suggest a reversal is near. In both cases, however, a resolution is found amongst market participants, and price either continues in the direction it was previously going or reverses in the opposite direction.

Sometimes, though, there is substantial disagreement between market participants and price oscillates wildly. This action is a type of price discovery that creates a series of higher highs and lower lows over a short period of time and is known as a broadening formation. Some traders refer to this pattern as a ‘Megaphone’ pattern, due to its clear resemblance to the vocal amplifier.

Broadening formations are particularly enticing to day traders and scalpers, as the volatility that creates them can present a multitude of buying and selling opportunities in a relatively short period of time. Traders who utilize The Strat philosophy are also keen on broadening formations, finding that price has a tendency to reverse after taking out the previous high or low due to exhaustion risk.

This is an image of a broadening formation on the CMG daily chart.

Scanning For Broadening Formations

In a recent update, we brought a new indicator to the platform called ‘Fractal Trendlines‘. Using this indicator, we are now able to offer a number of unique scanners that allow users to easily discover broadening formation setups that they might be interested in. These scanners are available for all TrendSpider users and can be accessed via the shared scanners list inside the Market Scanner. Searching the term ‘Broadening’ in the shared scanner list will yield the broadening formation scanners that are currently available.

This is an image of all of the broadening formation scanners in the shared scanner list.

You will note two different options; One intermediate-term and one long-term scan. The intermediate and long-term titles are in reference to the ‘Length’ setting found within the Fractal Trendlines indicator. On the indicator, this length is set to 21 by default. In the shared scanners, however, it is either set to 13 or 23, depending on whether you’re searching for intermediate or long-term broadening formations. Make sure to adjust the length on the indicator before running a scan so that you can see what the scan has found on the chart!

This is an image of the edit box for the fractal trendlines indicator.

As they are, these shared scanners only define two basic conditions. First, that hat a broadening formation exists, and second, that price is contained within the broadening formation. This means that price is below the upper trend line and above the lower trend line.

A more particular trader might be looking for price getting close to, or at the top or bottom of, the range. This can be done by creating your own copy of the shared scanner and adding a condition that defines price as ‘within range of’ either the upper or lower fractal trendline. An example of that condition is shown below.

This is an image showing how to script price within range of a fractal trendline.

When this specific condition is added to the shared scanner, it will find symbols whose price action is currently resting within 1% of the broadening formation high, like in the image below.

This is an image of a broadening formation on the NCLH daily chart.

For the active trader looking to capitalize on the wild price swings that broadening formations produce, this set of scanners should prove to be infinitely useful in day-to-day searches for tradable opportunities!

As always, we hope you find this update helpful, and if you have any questions do feel free to reach out to us via the ‘Contact Us’ button in the bottom right-hand corner of your chart.