Link: The Larger the Consolidation, the Larger the Bull

Nov 7, 2007: 7:13 PM CST

Gary at The Smart Money Tracker posted an excellent observation that is one of the basic tenets of technical analysis: The Larger the Consolidation Period, the Larger the Move out of Consolidation.

This concept is based in the Fourth Principle of Price Behavior which states that “Price Alternates Between Range Contraction and Range Expansion.”

Price consolidates to an equilibrium level where both buyers and sellers are comfortable at those levels, and a sudden impulse unhinges the balance and creates a sustained trend move.

View Gary’s article for helpful charts and a deeper explanation of why this phenomenon might work.

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