What is a Megaphone Pattern? (And How to Trade it)

A megaphone pattern is when price action makes a series of higher highs and lower lows over a period of time. Thus forming a megaphone like trend line shape.

Is a Megaphone Pattern Bullish or Bearish?

The megaphone pattern can be both bullish, and bearish chart patterns.

For example, after a strong uptrend, if a megaphone pattern forms that is considered a megaphone top.

Megaphone Top is considered a bearish signal–it can indicate a trend reversal to the downside.

The opposite of a bullish megaphone top is called a megaphone bottom. This patterns forms after a strong downtrend.

Megaphone Bottom is considered a bullish signal–it can indicate a trend reversal to the upside.

How to Trade the Megaphone Pattern?

In my own experience megaphone patterns are great trading patterns if you can catch rejection or bounce of the trend lines.

Or if you can catch the breakout of the megaphone pattern trend lines.

Anything in between is the wild wild west.

Is a Megaphone Pattern a Continuation Pattern?

A megaphone pattern by default is either bearish or bullish signal after an upward or downward trend, so no.

But it doesn’t mean it cannot be a continuation of a trend.

A megaphone top can most certainly be a continuation to more upside.

The same goes for a megaphone bottom. Even though a megaphone bottom is considered a bullish signal and can still continue to the downside.

Is a Megaphone Pattern a Good Swing Trading Strategy

Megaphone patterns can make a great swing trade especially if you’re grabbing monthly option contracts.

By grabbing monthly contracts, you can capitalize on the new higher highs or lower lows of the broadening formation.