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