Consolidation Trading Patterns

With consolidation chart patterns the stocks market can move in any direction after a stocks price break-out. Consolidation stocks patterns are used to spot breakout patterns in stocks charts. There are two different types of consolidation chart patterns that form on stocks charts:

• Symmetric Triangles - Consolidation Patterns
• Rectangle Patterns - Range Stock Chart Patterns

Symmetrical Triangles Stocks Trading Pattern

Symmetrical triangles are stocks chart patterns with converging trendlines 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 consolidation 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 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 consolidation and converge to form an apex - consolidation triangle pattern. A stocks price breakout should occur somewhere between 60% - 80% into the triangle consolidation pattern. An early or late stocks trading breakout is more prone to stocks whipsaws, and therefore less reliable. After a stocks price breakout to one side the apex of the consolidation triangle forms the support and resistance levels for the stocks price. Stocks price that has broken out of the consolidation chart pattern should not retrace past the apex. The apex is used as a stop-loss setting level for open stock trades placed after a stocks price breakout.

When consolidation trading patterns form we say that the stock trading market is taking a pause before deciding the next direction to take - this also signals an impending stocks price breakout - Stock Breakout Strategy Indicators - Stocks Trading Breakout Indicator - Stock Indicator To Confirm Breakout.

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

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However, this consolidation pattern can't go on forever - the stock chart example below shows how the consolidation chart pattern eventually had a stocks price breakout & moved in one direction.

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After stocks price consolidating, If stocks price breaks out the upper line we open stocks buy trades, if stocks price breaks-out the lower line we open sell stock trades.

Rectangle Chart Pattern

A rectangle consolidation pattern is a trading range with narrow stocks price action that forms a consolidation period in stock trading 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. Range consolidation chart pattern is drawn on a stocks chart using a rectangle, hence the name rectangle trading pattern.

For this consolidation chart pattern, stocks price forms a series of highs and lows that can be connected with horizontal stocks trendlines that are parallel to each other. Range consolidation pattern forms over an extended period of time giving this stocks chart pattern its rectangle shape.

A stocks trading breakout of stocks price action from this rectangle consolidation pattern forms when either of the horizontal line is penetrated and the stocks range of this rectangle trading pattern is broken. An up side stocks price breakout is a buy signal. A downside stocks price break-out is a sell signal.

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Stocks Price Breaks-Out of rectangle consolidation range after a period of time & price continues to move upward after an upward stocks price breakout.

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