Consolidation

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What is 'Consolidation'

Consolidation, in technical analysis, is the movement of an asset's price within a well-defined pattern or barrier of trading levels. Consolidation is generally regarded as a period of indecision, which ends when the price of the asset breaks beyond the restrictive barriers. Periods of consolidation can be found in charts covering any time interval (i.e. hours, days, etc.), and these periods can last for minutes, days, months or even years. Lengthy periods of consolidation are often known as a base.

BREAKING DOWN 'Consolidation'

The levels of resistance and support within the consolidation are created through the upper and lower bounds of the stock's price. Once the price of the asset breaks through the identified areas of support or resistance, volatility quickly increases and so does the opportunity for short-term traders to generate a profit.

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RELATED FAQS
  1. How do I identify a stock that is under consolidation?

    Discover the three major characteristics that stocks or securities exhibit when they are trading under a period of price ... Read Answer >>
  2. What does it mean if a security is under consolidation and why is it important?

    Discover some of the different meanings for "consolidation" with respect to traded securities. Learn why consolidation is ... Read Answer >>
  3. What are some common strategies used when a stock is under consolidation?

    Read more about what trading opportunities can be realized while a stock is under consolidation and trading within a seemingly ... Read Answer >>
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    Learn how forex currency pairs exhibit recognizable consolidation patterns. These patterns offer traders the opportunity ... Read Answer >>
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