Bilateral/Consolidation Stocks Chart Patterns Stock Trading

With bilateral/consolidation stock trading chart patterns the stocks market can move in any direction. There are two different types of consolidation stocks chart patterns that form on stock charts:

• Symmetric Triangles - Consolidation stock trading patterns
• Rectangles - Range/ranging market

Consolidation Stocks Trading Patterns

Symmetrical triangles are stocks chart patterns with converging stock trend lines that form a consolidation period. The technical buy point from a symmetrical triangle is the upside break, while a downside break is a technical sell stock signal. Ideally, a market breaks out from a symmetrical triangle prior to reaching apex of the triangle.

Stock Trendlines can be drawn connecting the lows & highs of the consolidation phase, the stock trend lines formed are symmetric and converge to form an apex. A breakout should occur somewhere between 60-80% into the triangle stocks pattern. An early or late breakout is more prone to failure, and therefore less reliable. After a stock price breakout the apex forms support and resistance levels for the stock price. Stock Price that has broken out of the apex should not retrace past the apex. The apex is used as a stop loss setting area for the open Stock trades.

When these consolidation patterns form we say that the stocks market is taking a pause before deciding next direction to take.

These consolidation patterns form when there is a tug of war between the buyers and the sellers and the stock market cannot decide which way to continue.

Consolidation Stock Chart Pattern

However, this pattern cannot go on forever and just like in a tug of war one side eventually wins, looking at the stock chart below see how the consolidation eventually had a breakout and moved in one direction. Now how do we as stock traders make sure we are on side that's winning?

Break Out Downwards Sell Stock Signal after a Consolidation

Breakout Upward Buy Stock Signal after a Consolidation

Now back to our question, how do we make sure we are on the side that is winning?

Well we wait until stocks price moves past one of the lines and put buy or sell orders in that direction. After consolidating, If stocks price breaks-out the upper line we buy, if it breaks out the lower line we sell.

Alternatively if you don't want to wait out the consolidation, you can use pending stock orders. If you would like to know more about pending stock orders go to the topic: Stop Entry Stock Order Types

The two types of stop order types used to trade consolidation stock trading chart patterns are:

• Buy Entry Stop An order to buy at a level above stocks market stock trading price.

• Sell Entry Stop An order to sell at a level below stocks market stock trading price.

These are stock orders to buy above the stocks market or to sell below the stock market.

Rectangle Stocks Trading Pattern

A rectangle consolidation pattern is a trading range with narrow stocks price action which forms a consolidation phase in stocks market. The trading range is defined by two parallel stock trend lines which are horizontal and indicate the presence of support and resistance. This stock trading pattern is drawn on a stocks chart using a rectangle, therefore thus its name rectangle stock trading chart pattern.

For this consolidation stocks chart pattern, stocks price forms multiple highs and lows that can be connected with horizontal stock trend lines that are parallel to each other. This stock trading pattern forms over an extended period of time giving the pattern its rectangle shape.

A breakout of stocks price action from this consolidation pattern forms when either of the horizontal line is penetrated & the trading range of this rectangle is broken. An upside breakout is a buy stock signal. A downside breakout is a sell stock trade signal.

Rectangle Pattern Stocks Trading - Consolidation Pattern

Stock Price Breaks the consolidation range after sometime & continues to move upward after an upward market breakout.