Consolidation

Consolidation is a term used in technical analysis to describe a period of indecision which ends when the stock price breaks through a Resistance Level or alternatively breaks below a support level.

Consolidation

Consolidation is a term used in technical analysis to describe a period of indecision which ends when the stock price breaks through a Resistance Level or alternatively breaks below a support level.


Identification of Consolidation

Consolidation is the absence of a trend and the stock or market is range bound. 

Periods of consolidation can be found in any time interval (i.e. hours, days, weeks), and these periods can last for minutes, days, months or even years. Lengthy periods of consolidation are often known as a base.

Illustration of consolidation where the price trades within a range and establishes a base prior to the next leg up. 

Illustration of consolidation where the price trades within a range and establishes a base prior to the next leg up. 

Consolidation Interpretation

Traders generally look for a high volume breakout from the trading range and then establish a long position.

RELATED TERMS