Consolidation describes a period where price moves in a relatively tight range after a directional move, as the market digests the prior trend and participants reassess their positions. During consolidation, neither buyers nor sellers have a clear edge — selling pressure and buying demand are roughly balanced. Common consolidation patterns include flat flags and pennants (tight ranges after a sharp move), cups-and-handles, and broad trading ranges between horizontal support and resistance. Healthy consolidations in uptrends are characterized by declining volume and low-volatility price action — the stock is resting rather than being distributed. The direction of the eventual breakout from consolidation is often predictable by the context: consolidation after a strong uptrend more frequently resolves to the upside, continuing the prior move. The longer and tighter the consolidation, the more powerful the breakout tends to be when it occurs.
