The second characteristic is a narrow trading range; be careful, though, because not all stocks and securities have similar volatility. The last feature to look for is a relatively low level of trading volume that does not exhibit major spikes.
Consolidation is neither positive nor negative on its own.
Once you have identified a consolidation, keep an eye out for any possible breakouts above or below the upper and lower trading range bounds.
These breakouts can be accompanied by large increases in volume and lead to large gains or losses in a short period of time, especially if the stock has been in consolidation for a longer stretch of time.
Traders, careful about possible overbought or oversold positions, may look to smooth out movements before another trend emerges.With over five hours of on-demand video, exercises, and interactive content, you will learn how to set price targets and get out of bad trades quickly.] Identify a stock that is under consolidation by watching for three simultaneously occurring properties on a price chart.The first is that the stock has definable and steady support and resistance levels, much like a flag continuation pattern.His health-care push, for example, isn't stalled because of the 60-vote threshold in the Senate.It's actually not even subject to it; his problem is getting House Republicans to agree.