Which of the following is a pattern that occurs during high volatility, when a security shows great movement with little direction?
Click on the arrows to vote for the correct answer
A. B. C. D.A
The pattern that occurs during high volatility when a security shows great movement with little direction is called a "broadening formation." This pattern is characterized by increasing price swings and alternating peaks and valleys that move progressively higher and lower, resulting in a widening pattern. The broadening formation is also known as a "megaphone pattern" or "expanding triangle" because of its shape.
The broadening formation is a technical analysis pattern that indicates that the market is uncertain about the direction of the security's price movements. This pattern is commonly seen during periods of high volatility and can be seen on charts of all timeframes. Traders and analysts often use the broadening formation as a signal to exercise caution in their trading and to wait for clearer signals before taking action.
The relative strength index (RSI), on balance volume (OBV), and Bollinger bands are all technical analysis indicators that traders use to analyze market trends and predict future price movements. However, none of these indicators is directly related to the broadening formation pattern. The RSI measures the strength of a security's price movements, while the OBV measures the volume of a security's trades. Bollinger bands are a statistical measure of a security's volatility, and they are used to identify potential trading opportunities based on how close the price is to the upper or lower band.
In summary, the correct answer to the question is A. Broadening formation. This pattern is characterized by great price movement with little direction and is commonly seen during periods of high volatility. The other options (B. Relative strength index, C. On balance volume, and D. Bollinger bands) are all technical analysis indicators that traders use to analyze market trends and predict future price movements, but they are not directly related to the broadening formation pattern.