Technical Analysis- Consolidation

When consolidation occurs the security's price that has recently broken out of a trend and will begin to level off. Within this process, supply and demand meet and become more and more less even. This occurs because investors will unload shares of the security in the market and there are purchasers of those shares to support the influx of the supply or visa versa.

Two possible scenarios of consolidation can play out: distribution and accumulation. Distribution occurs when there are more sellers moving into the market than there are buyers. When this selling begins to overwhelm the buying, prices begin to fall. When supply is too great, prices fall in efforts to move inventory.



Accumulation is the polar opposite of distribution. Accumulation occurs when there are more buyers moving in the market than there are sellers. When buying begins to overwhelm the selling, prices begin to rise. In other words, when supply is limited, prices rise because demand is so great.


Trend analysis
Support and Resistance Levels
Head and Shoulders Formation
Saucers
Breakouts
Consolidation