Timing Breakouts with Broadening Formations

Without this template, inside bars and rev strats get taken blindly. Inside a long consolidation, smaller price discoveries form new internal broadening formations (see motherbar problems). Those too-tight internal triangles are where traders get chopped. The breakout worth trading is the one that resolves the whole structure.

Anticipating the 3

Rule: when price fails one side of a range and starts coming back through the other side, and there is full timeframe continuity, an outside bar (a 3) is about to occur. That is the proper way to gauge magnitude: the expansion is visible before it completes. A failed breakout of any range increases the probability of testing the other side, especially when an actionable signal triggers the initial reversal.

The template

Identify: the broadening formation series, the inside week, and the inside month. Trigger: the actionable signal that breaks them with FTFC in the same direction. Result: range expansion of the larger triangle.

For example, an internal triangle (lower low, higher high, lower low, higher high) forms during an inside month, itself part of a multiple-inside pattern with several months held completely within one bar’s range. The inside week breaks, reclaims the level, then breaks all the way back down. The actionable signal on the inside month finally causes range expansion: expansion of the larger triangle. All three universal truths align: the inside bars (consolidation framework), FTFC on the break, and the broadening formation series. Trading on one truth alone gets you in trouble, and so does trading on two.

Get out and stay out

Once price exits a range, it must stay outside (or the other side gets tested). Two ways to trade it: Momentum: the outside-bar expansion has to go. If it fails, price reclaims the previous level and the reversal can be violent (see levels of reclaim). Structured: combine the full template above to time when the range finally breaks, then let the break confirm before pressing.

Drawing is secondary

The lines are only visual representations of what is known to be true, and they change with every new day, week, month, or 60 (see price discovery for drawing rules). Knowing where the triangles will be (and where the reclaim levels are) matters more than drawing them. Watch for a change in timeframe continuity with actionable signals that reclaims a previous range. That is triangle risk (broadening formation risk).

On the chart

MDLZ, weekly, 2024, is a full campaign inside the 2023 yearly bar. The animation walks the whole sequence: the September 2u-1-2d at the top of the range, the broadening formation drawn right to left to gauge magnitude, the same structure read as levels of reclaim, two adds on the way down, and the final target, the break of the 2023 yearly low at $60.75.

Related: Motherbar Problems · Levels of Reclaim · Actionable Signals · Full Timeframe Continuity
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