Consolidation, Congestion, Correction
All of these terms describe the same event in the markets. After a rally, a certain portion of the bulls decide that prices are above fair value. They take advantage by locking in these excess profits with a sale. At the same time, even the most timid of the bears decides that the market is just too attractive not to sell short (selling short is a bearish strategy to sell borrowed stock or futures now and buy them back later). This combination changes the balance in the market, increases supply, and prices fall.
During this decline, portfolios are realigned, news is digested, and investors enter and leave the market. The way all of this unfolds determines the shape of the pattern on the chart. Consolidation ...
Get Technical Analysis Plain and Simple: Charting the Markets in Your Language, Second Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
