ATMASphere Aug 2014
ATMASphere Aug 2014
ATMASphere Aug 2014
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Consolidation Patterns through the eyes<br />
of volume<br />
The typical behavior of consolidation patterns is lack of price<br />
direction and volume contraction.<br />
During sideways movement Price often gets confined between two<br />
lines which can be horizontal (support and resistance) or angular<br />
(triangles, wedges). The consolidation period ends when price breaks<br />
support or resistance. Breakouts which are accompanied by volume<br />
only sustain.<br />
1. Ascending Triangles: An Ascending triangle is a Bullish pattern<br />
with an upward sloping line (support) and a flat top line<br />
(resistance). The pattern will have higher lows which show<br />
decreasing selling pressure every time price goes near the<br />
angular support line. It can have 2 or more highs near the<br />
resistance line. Volume contracts during the triangle formation<br />
and increases once the breakout happens.<br />
Patterns such as triangles and flags are commonly seen in sideways<br />
market.<br />
Let’s see how volume behaves in a trend consolidation phase and<br />
breaks out in continuation of previous trend.<br />
Volume behavior in triangles: Triangular patterns are created<br />
during consolidation phases, representing a temporary pause in the<br />
ongoing trend before continuing in the trend direction. A triangle is<br />
formed with at least 2 touches on the converging support and<br />
resistance lines. Volume contracts during the triangle formation<br />
period. Triangles can be symmetrical, ascending or descending.<br />
AUGUST <strong>2014</strong><br />
ATMASPHERE | 5