Bilateral/Consolidation Chart Patterns Stocks

With bilateral/consolidation trading patterns the stocks market can move in any direction. There are two different types of consolidation chart patterns that form on stock trading charts:

• Symmetric Triangles - Consolidation stocks trading chart patterns
• Rectangles - Range/ranging market

Symmetrical Triangles Stocks Trading Pattern

Symmetrical triangles are stocks chart patterns with converging stocks trend lines that form a consolidation period. The technical buy point from a symmetrical triangle is the upside break, while a downside break is a technical sell signal. Ideally, a market breaks out from a symmetrical triangle prior to reaching the apex of the triangle.

Stocks Trend lines can be drawn connecting the lows and highs of the consolidation phase, the trend lines formed are symmetric and converge to form an apex. A breakout should occur somewhere between 60-80% into the triangle chart pattern. An early or late breakout is more prone to failure, and therefore less reliable. After a stocks price breakout the apex forms support and resistance levels for the stocks price. Stocks Price that has broken out of the apex should not retrace past the apex. The apex is used as a stop loss setting area for the open Stocks trades.

When these consolidation patterns form we say that the stock trading market is taking a break before deciding the next direction to take.

These consolidation patterns form when there is a tug of war between the buyers and the sellers and the stocks market cannot decide which way to move.

Consolidation Chart Pattern

However, this pattern cannot go on forever and just like in a tug of war one side eventually wins, looking at the stock chart below see how the consolidation eventually had a breakout and moved in one direction. Now how do we as stocks traders make sure that we are on the winning side?

Breakout Downwards Sell Stocks Signal after a Consolidation

Breakout Upwards Buy Stocks Signal after a Consolidation

Now back to our question, how do we make sure we are on the winning side?

Well we wait until stocks price moves past one of the lines and put buy or sell orders in that direction. After consolidating, If stocks trading price breaks the upper line we buy, if it breaks out the lower line we sell.

Alternatively if you do not want to wait out the consolidation, you can use pending stocks orders. If you would like to know more about pending stocks orders go to the topic: Stop Entry Stocks Order Types

The two types of stop order types used to trade consolidation chart patterns are:

• Buy Entry Stop An order to buy at a level above the stocks price.

• Sell Entry Stop An order to sell at a level below the stocks price.

These are stocks orders to buy above the stocks market or to sell below the stocks market.

Rectangle Chart Pattern

A rectangle consolidation pattern is a trading range with narrow stocks price action that forms a consolidation phase in stock trading market. The trading range is defined by two parallel stocks trend lines which are horizontal and indicate the presence of support and resistance. This stocks pattern is drawn on a stocks chart using a rectangle, therefore the name rectangle trading pattern.

For this consolidation chart pattern, stocks price forms multiple highs and lows that can be connected with horizontal stocks trend lines that are parallel to each other. This stocks pattern forms over an extended period of time giving the pattern its rectangle shape.

A breakout of stocks price action from this consolidation pattern occurs when either of the horizontal line is penetrated and the trading range of this rectangle is broken. An upside breakout is a buy signal. A downside breakout is a sell signal.

Rectangle Pattern Stocks Trading - Consolidation Pattern

Stocks Price Breaks the consolidation range after sometime and continues to move upwards after an upwards market breakout.