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Stock or Stock Market Consolidation Meaning.


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What Is Consolidation?

Consolidation is the term for a stock or security that is neither continuing nor reversing a larger price trend. Consolidated stocks typically trade within limited price ranges and offer relatively

few trading opportunities until another pattern emerges. Technical analysts and traders regard consolidation periods as indecisive and cautious.

Consolidation



IMP Bullets:

  • Stocks under consolidation trade in a limited range.
  • Identifying consolidating stocks involves looking for those that have steady support and resistance levels, trade in a narrow range, and have low trading volumes.
  • An important step in trading consolidation patterns involves measuring how long the pattern has held.
  • Trading on narrowly consolidated stocks can occur but there is often less room for profit due to the small range.

* Stocks Under Consolidation

You can identify a stock that is under consolidation by watching for three simultaneously occurring properties on a price chart.

The first is that the stock has definable and steady support and resistance levels, much like a flag continuation pattern.

The second characteristic is a narrow trading range. Be cautious, though, because not all stocks and securities have similar volatility. Trading ranges are relative.

The last feature to look for is a comparatively low level of trading volume that does not exhibit major spikes.

Consolidation is neither positive nor negative on its own. Occasionally a consolidation period emerges after a healthy price movement. Traders,

careful about possible overbought or oversold positions, may look to smooth out movements before another trend emerges.

Example: 











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