Consolidation Stock Chart Patterns
With consolidation stocks trading chart patterns the stocks market can move in any direction after a stocks price breakout. Consolidation stocks chart patterns are used to identify breakout patterns in stocks charts. There are two different types of consolidation stocks chart patterns that form on stocks charts:
- Symmetric Triangles - Consolidation Stock Chart Patterns
- Rectangles - Range Stock Chart Patterns
Symmetrical Triangles Stocks Trading Pattern
Symmetrical triangles are stocks chart patterns with converging trend lines that form a stocks price consolidation period that signals there is going to be a stocks price breakout in one direction after this stocks chart pattern breaks out in one direction. The stocks buy signal from a symmetrical triangle is the upside stocks price break, while a downside stocks price break is a stocks sell signal. Ideally, a the stocks price breaks out from a consolidation stocks chart pattern prior to reaching the apex of the triangle.
Stocks Trend lines stocks trend lines can be drawn connecting the lows and highs of the consolidation pattern for the stocks price, the trend lines formed are symmetric and converge to form an apex - symmetric triangle pattern. A stocks price breakout should occur somewhere between 60% - 80% into the triangle consolidation stocks chart pattern. An early or late stocks trading breakout is more prone to stocks trading whipsaws, and therefore less reliable. After a stocks price breakout to one side the apex of the symmetric triangle forms the support and resistance levels for the stocks price. Stocks price that has broken out of the consolidation stocks chart pattern should not retrace past the apex. The apex is used as a stop loss setting level for the open stock trades placed after a stocks price breakout.
When stocks trading consolidation patterns form we say that the stock trading market is taking a break before deciding the next direction to take - this also signals an impending stocks price breakout - How to Trade Breakouts In Stocks Trading - How to Identify Stock Trading Breakout Pattern - Breakout Strategy Stocks.
These stocks trading consolidation patterns form when there is a tug of war between buyers and sellers and the stock trading market cannot decide which way to move.
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However, this consolidation stocks chart pattern cannot go on forever and just like in a tug of war one side eventually wins, the stocks chart examples below shows how the consolidation stocks chart pattern eventually had a stocks price breakout and moved in one direction.
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After stocks price consolidating, If stocks price breaks the upper line we open stocks buy trades, if stocks price breaks the lower line we open sell stock trades.
Rectangle Stocks Trading Pattern
A rectangle consolidation stocks chart pattern is a trading range with narrow stocks price action that forms a consolidation period in stock market. The stocks range is defined by two parallel stocks trend lines which are horizontal and these indicate the presence of support and resistance levels at this particular area. Rectangle consolidation stocks chart pattern is drawn on a stocks chart using a rectangle, therefore the name stocks trading rectangle stocks trading chart pattern.
For this stocks trading consolidation stocks chart pattern, stocks price forms a series of highs and lows that can be connected with horizontal stocks trend lines that are parallel to each other. Rectangle consolidation stocks chart pattern forms over an extended period of time giving this stocks trading pattern its rectangle shape.
A stocks trading breakout of stocks price action from this rectangle consolidation stocks chart pattern occurs when either of the horizontal line is penetrated and the stocks range of this rectangle stocks trading pattern is broken. An upside stocks price breakout is a buy stocks signal. A downside stocks price breakout is a sell stocks trade signal.
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Stocks Price Breaks Out of the rectangle consolidation range after a period of time and stocks price continues to move upwards after an upwards stocks price breakout.
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