Bilateral/Consolidation Stock Index Chart Patterns Stock Indices

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

• Symmetric Triangles - Consolidation stock indices chart patterns
• Rectangles - Range/ranging market

Consolidation Stock Index Chart Patterns

Symmetrical triangles are stock indices chart patterns with converging stock indices 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 stock indices signal. Ideally, a market breaks out from a symmetrical triangle prior to reaching the apex of the triangle.

Stock Indices Trend lines can be drawn connecting the lows and highs of the consolidation phase, the stock indices trend lines formed are symmetric and converge to form an apex. A breakout should occur somewhere between 60-80% into the triangle stock indices chart pattern. An early or late breakout is more prone to failure, and therefore less reliable. After a stock indices price breakout the apex forms support and resistance levels for the stock index price. Indices 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 Indices trades.

When these consolidation patterns form we say that the stock index 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 stock indices market cannot decide which way to move.

Consolidation Stock Index 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 index chart below see how the consolidation eventually had a breakout and moved in one direction. Now how do we make sure we are on the winning side?

Breakout Downwards Sell Stock Indices Signal after a Consolidation

Breakout Upwards Buy Stock Indices Signal after a Consolidation

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

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

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

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

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

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

These are stock indices orders to buy above the stock indices market or to sell below the stock index market.

Rectangle Stock Index Chart Pattern

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

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

A breakout of stock index 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 stock indices signal. A downside breakout is a sell stock indices signal.

Rectangle Pattern Stock Indices Trading - Consolidation Pattern

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