Correction, Consolidation, Sideways Consolidation - After Up/Down Move

After every Up/Down Move, there will be Relaxation. the relaxation may be a Correction or Consolidation or Sideways Consolidation

Correction (Shot term Reversal)-
      Here Correction means little more downside movement (in uptrend/ resistance break) of price with little big trendline slop. Generally Correction end till it reaches a support area that might be previous Resistance. Actually it can be considered as a short reversal to the support.
Correction happen just after the Breakout (to test the Support Level) or after a massive upmove (Straight upmove in less time). Short term traders and retail traders booking theire full or partial profit during consolidation period while some traders especially long tern traders use this opportunity to buy stock. that's why it has only little slope.

After the correction, The stock move to the direction of breakout.

Consolidation
      Consolidation happen after a big price movement to up/Down. In Consolidation phase, Stock Price do not move to neither up or down. But it will have a little downward slope (after upward movement)

Sideways Consolidation
        Sideways Consolidation means sideways movement of stock price after a price movement to up/down.Sideways Consolidations happen either during trending market phases or before a new trend

Correction
Consolidation
Sideways Consolidation
Relatively High price Movement
Little Price Movement
No Movement in Price. Just Sideways
It forms LL LH Pattern in correction in Uptrend
Just little down move. No LL LH pattern or other price Pattern
No Pattern. Just sideways Movement
Candle stick or chart pattern is enough to identify trend change or reversal
Only Trendline or Previous High/Low Breakout can be used to identify for trend reversal
Horizontal Support or Resistance can be used for trend change
Trend will be reversed on last Support / Previous HH or Last LL
Consolidation may be reversed at any price point.
Consolidation end only after support/resistance break
Candlestick pattern works well at support/Resistance level
Due to above reason, Candlestick pattern may produce wrong signal
No role for the candlestick pattern.

Comments

Post a Comment

Popular posts from this blog

Identify Support / Resistance. Identify Trend Change while Sup / Res Breaking

Image
All stock chart will have Support and Resistance whether it is sideways or trending . Find the right support and resistance is the key to the good trade. Most of the time it is difficult to identify which is support or resistance. Here are some points which helps to identify the support or resistance in different Market conditions. Importance and features of Support or Resistance? will the trend or momentum change if Support (or Resistance) broke? or Role of Support and Resistance to change in trend or Momentum This Article try to find "will the trend or momentum change if Support (or Resistance) break. Identify which is Support or Resistance in trending stock? Sideways Move In a sideways Market, Frequent price retracement area will be the support or resistance. Up trending Market In a up trend market, Last Higher High will be the resistance and Higher Low will be Support The momentum or price trend will change after HL Break. Otherwise the momentum is ...
Read more

How to Confirm a Trend Change. Method to identify momentum change

Image
Condition 1 From down trend to Uptrend, At least one higher Low is essential for trend change. And followed by Higher High will confirm the trend change Condition 2 From down trend to Uptrend, Last Lower high in downtrend should break to confirm the trend change.(In the above picture, LH  Just before the Last LL ) Condition 3 1 2 3 PATTERN OR SWING LOW PATTERN CAN BE USED TO IDENTIFY MOMENTUM CHANGE Condition 4 Use trendline Break with above rule together for true result By checking and ensuring the above condition whether the conditions are met or not met will help you to identify the trend change. we ca not get to the conclusion with only one condition above. for example, we can not say that trend has changed if the trendline is breaked
Read more

Distinguish Retracement and Doubletop. trend or momentum is changing or not

Image
In an Uptrend (or Downtrend), retracement will be happened. But At    a point there may be double top indicating the trend change.here are some feature of both to identify the pull back which is a retracement or it is for trend change(Doubletop) Double top only happened on the top of a move. Ie. it happened only after a clear move to up or down. And the point of doubletop will be long in distance for a sideways move or volatility. While the retracement happened in every up move that may happened just above(below) the sideways channel In double top, last resistance will not be broken in up move In retracement, every resistance will be broken in up move In double top, last support may be broken in pull back just for a while indicating trend change In retracement, last support will not be broken indicating healthy trend Double To Usually leads to trend Reversal or Change in Momentum while retracement may not lead to trend reversal In Retracement, Price m...
Read more