December 11, 2008
What is a Consolidation Pattern?
By Planet Wealth
Amp is a stock to keep an eye on for a potential breakout in the next week or two, as it has formed a Consolidation pattern. So what is Consolidation pattern and how does this produce trading opportunities for the small term trader?
A consolidation pattern often follows after a stock has spent time in a strong trend. The stock’s momentum exhausts and needs time to “catch up” or “refuel”. The consolidation is indecision between the buyer and sellers. Generally, the longer and tighter the consolidation, the stronger the break out. This is where a trading opportunity exits. Being able to wait patiently for a breakout signal with probability stacked on your side, then acting on it.
Amp was in a significant down trend for about 6 weeks before coming to a pause for the last month. Though there have been small movements up and down each day, over all the price has not went away from the $5.10 to $5.50 mark. This also happens to be a weekly support line. If this is a re test and the stock breaks up it is like to test the next major weekly resistance at $6.15. If the re test fails and breaks down $4.20 is the next weekly support.
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