What is a Megaphone Pattern?
A megaphone pattern is a broadening price formation where swing highs keep pushing higher and swing lows keep pushing lower, creating two diverging trendlines that flare out like a megaphone.
The pattern reflects expanding volatility and indecision in the market.
What Does a Megaphone Pattern Indicate?
A megaphone pattern indicates expanding volatility and a market that can't agree on value. Buyers force higher highs. Sellers slam price back down to lower lows.
The widening range shows aggressive two-sided participation, with both sides stepping up with size. Price action inside the structure stays unstable and prone to sharp reversals, so expect no clean trends until the structure breaks.
Is the Megaphone Pattern Bullish or Bearish?
The megaphone pattern is direction-neutral until price breaks and holds outside one boundary. The structure contains both bullish pressure (higher highs) and bearish pressure (lower lows), which is why traders should not pre-guess the move.
Wait for the break. The break is the signal.
How to Identify a Megaphone Pattern?
Identify a megaphone pattern by spotting a sequence of expanding swings that produce diverging support and resistance lines. The key word is expanding — each swing must be bigger than the last, or the formation is just a range.
At least two rising swing highs that keep extending to new highs
At least two falling swing lows that keep extending to new lows
Clear alternation between highs and lows, with price traveling through the interior rather than just wicking the edges
A widening range where each new swing expands beyond the prior swing
How to Draw a Megaphone Pattern?
Draw a megaphone pattern by marking the major swing highs and swing lows, then connecting them with two diverging trendlines. Two-touch lines are valid. Three-touch lines are stronger and worth waiting for.
Draw the upper trendline by connecting at least two (preferably three) higher swing highs
Draw the lower trendline by connecting at least two (preferably three) lower swing lows
Extend both lines forward so the widening cone is visible and tradable in real time
How to Trade a Megaphone Pattern?
Trade a megaphone pattern by waiting for a candle to close outside the upper or lower trendline, then taking the breakout or waiting for the retest. The retest is the cleaner trigger when it shows up.
Long setup: daily close (or your chosen timeframe) above the upper trendline, then buy the breakout or the throwback hold
Short setup: close below the lower trendline, then short the breakdown or the retest failure from underneath
Confirmation: prioritize a breakout candle with range expansion and volume, especially on volume-traded markets like equities and futures
What is the Profit Target for a Megaphone Pattern?
The profit target for a megaphone pattern is a measured move based on the formation's height, projected from the breakout point.
Measure the vertical distance between the highest swing high and lowest swing low inside the structure (the widest height)
Project that distance from the breakout level in the breakout direction
Example: if the widest height is $20 and price breaks above $100, the measured target is $120. If it breaks down below $90, the measured target is $70.
Where to Put a Stop Loss on a Megaphone Pattern?
Put the stop loss beyond the most recent swing point inside the structure, not tight to the trendline. Swings expand as the pattern matures, and a tight stop gets wicked out before the move develops.
Long: place the stop below the most recent swing low that formed before the upside breakout (or below the throwback low if you entered on a retest)
Short: place the stop above the most recent swing high that formed before the downside breakdown (or above the retest high if you entered on a retest)
What Happens After a Megaphone Pattern?
After a megaphone pattern breaks, price either follows through into a trend move or snaps back inside and traps the breakout traders. Both outcomes happen, so manage the risk rather than predict which one shows up.
Throwback/pullback: price retests the broken trendline, then continues if the retest holds
Failure mode: a close back inside the formation after the break leads to a fast move toward the opposite boundary
Continuation behavior: strong follow-through shows expanding candles and clean separation from the broken line
What are the Different Types of Megaphone Patterns?
The three types of megaphone patterns are symmetrical, ascending, and descending broadening formations, defined by how the two diverging boundaries slope.
Symmetrical megaphone: both trendlines diverge at a similar rate
Ascending megaphone: the upper boundary rises more aggressively while the lower boundary is flatter or rises slowly
Descending megaphone: the lower boundary falls more aggressively while the upper boundary is flatter or falls slowly