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Technical Analysis Plain and Simple: Charting the Markets in Your Language, Third Edition by Michael N. Kahn - CMT

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9. Chart Patterns—When the Market Needs a Rest

Markets go up and markets go down, but they also go sideways. Both bulls and bears can lose their desires to buy and sell aggressively as value is established. They wait for the next clues the market will leave as it decides where it wants to go next. This chapter contains key information describing how to read a chart.

Just like a car heading out for a long journey, trending markets need to rest occasionally to refuel. These “rest stops” are called congestion zones. Congestion zones are price levels where the bulls and the bears are taking their profits, licking their wounds, and rethinking their strategies.

Most technical patterns form when the market trades in the same price range over ...

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