A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits

Secondary Trend Volatility

The move from one primary trend to another is likely to be signaled and confirmed by a variety of signals. By the same argument, secondary trends often provide short-term volatility in a long-term consolidation trend.

Key Point

When primary trends are interrupted by secondary trends, high volatility in that period is not uncommon.

For example, in Figure 15.3, a long-term consolidation with prices range bound with a five-point breadth between $21 and $16 was tested with short-term volatility moving price as high as $25 and as low as $14, with several failed breakouts both above and below. This pattern was shown over two years on the chart in Figure 15.3.

Figure 15.3 Secondary trend volatility during primary consolidation ...