Bilateral/Consolidation Chart Patterns Stocks

With bilateral/consolidation patterns the market can head in any direction. There are 2 different types of consolidation patterns that form on charts:

• Symmetric Triangles - Consolidation stocks chart patterns
• Rectangles - Ranging market

Symmetrical Triangles Stocks Setup

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

Stocks Trendlines can be drawn connecting the lows and highs of the consolidation setup, the trend lines formed are symmetrical & 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 liable to fail, & therefore less reliable. After a price breakout the apex forms support and resistance levels for the price. Price that has already broken out of the triangle pattern should not retrace past the apex point. The apex point is used as a stop loss setting area for the open trades.

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

The consolidation patterns form when there is a tug of war between buyers & the sellers & the market can't decide which side to move.

Consolidation Chart Setup

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

Break-out Downward Sell Signal after a Consolidation Chart Setup

Break-out Upward Buy Stocks Signal after a Consolidation Chart Setup

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

Well we wait until price goes past one of the lines & put buy or sell orders in that specific direction. After consolidation, If stocks price breaks-out the upper line we buy, if it breaks-out the lower line we sell.

Alternatively if you don't want to wait out the consolidation setup, you can set pending stocks orders. If you-wouldyou'd like to learn more about pending stocks orders navigate to the topic: Stop Entry Stocks Order Types

The 2 types of stop order types used to trade consolidation patterns are:

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

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

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

Rectangle Chart Setup

A rectangle consolidation setup is a range with a narrow stocks price action which forms a consolidation phase in market. The price range is defined by 2 parallel trendlines which are horizontal & indicate the presence of support and resistance. This stocks pattern is plotted on a chart using a rectangle, hence the name rectangle trading pattern.

For this consolidation setup, price forms multiple highs & lows that can be then joined with horizontal trendlines that are parallel to each other. This stocks pattern forms over an extended period of time, giving the setup its rectangle shape.

A break-out of stocks price action from this consolidation setup occurs when either of the horizontal line is penetrated & the range of this rectangle is broken. An upside break-out is a buy signal. A downward break-out is a sell signal.

Rectangle Pattern Stocks - Consolidation Pattern

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