ATMASphere Aug 2014

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