Ranges and consolidation
A range is price moving back and forth between two zones without a clear direction. Consolidation is the name often given to this pause, usually after a trend. A range ends with a close outside one of its edges and price staying there.
What is a range?
In a trend, highs and lows shift in one direction. In a range, the highs stay at roughly the same level and so do the lows. Price moves back and forth between an upper and a lower bound; this area is called a range.
Consolidation usually describes the phase in which price rests after a clear rise or fall. Not every consolidation looks like a range; a narrowing triangle or a short flag is a consolidation too. This page covers the horizontal form.
What usually happens inside a range
- Price travels from one edge to the other; reactions usually come at the edges.
- In the middle of the range price is undecided, with more short, directionless moves.
- The edges are often tested with wicks. Briefly crossing an edge and closing back inside is common in this phase.
- As the range goes on, moves often calm down and candles get smaller.
These are tendencies; not every range behaves the same way.
How a range ends
A range only counts as over when price closes outside one of its edges and stays there. Three pictures can follow.
Break upwards
The close comes above the upper zone's top edge and the next candles stay above the zone too.
Break downwards
The close comes below the lower zone's bottom edge and the next candles stay below the zone too.
False breakout
Price moves outside an edge but soon returns inside the range. The range continues; sometimes price heads for the opposite edge.
What it shows, what it does not prove
What it shows
- That price has, for now, found a balance between two zones
- Which zones the reactions come from
- Which close would count as the end of the range
What it does not prove
- Which way the range will break
- How long the range will last
- That the edges will hold on the next test too
The MarketLevelMap view
How it relates to zones
The edges of a range are not single prices but zones. Highs and lows do not land on exactly the same price; they spread over a nearby area. The upper edge reads as a resistance zone and the lower edge as a support zone.
Reading the edges as bands makes it easier to tell wicked tests inside the range from a breakout. A close inside the zone is not yet a break; a break is measured by a close beyond the zone's far edge. The middle of the range is the gap between the two zones, and reactions there mean less than those at the edges.
Often confused with
For general information only. Not investment advice.Last updated: