What's consolidation in stock market and how it can help you spot breakouts

Whenever a stock shows a consolidation pattern, one needs to wait for the breakout.

Consolidation is a phase when a stock or an index trades within a range. The trend is said to be sideways and may vary depending on the circumstance. Once this range is broken, it may lead to bigger moves, but until the range is intact, the movement cannot be clearly predicted. 

Indicators like volumes and technical instruments like Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) assist in the confirmation of a firm breakout.

Key aspects of a consolidation phase

• Longer the consolidation period, the bigger is the movement on the breakout. Longer time periods assist in developing strong