Chapter 3 Definitions, Structures, & Examples
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Nirvana Systems Inc.
3-31
Profiting with Chart Patterns
Figure 3-31.
Consolidation
Structure Diagram
Here is the reason Consolidations are so powerful. Measure the width of that range.
What you will find is, if you go to the left of the chart the same width,
moving the
exact same distance to the left, you will almost always find a low point that same
distance away. Now, take the width again and move to the right to find out where the
target is. You will also find that Consolidation occurs in
the center of the ultimate
move. You can also go up twice the distance from that relative low that we found on
the left to the center of the Consolidation to get the vertical distance to the target.
Those two dimensions very accurately pinpoint where the chart is most likely going
to go from that formation of Consolidation.
In the following examples, I think you will see that this
really does work and is an
amazing, powerful, and trade-able pattern. If a Consolidation fails and goes in the
opposite
direction, that pattern is equally trade-able. The psychology of the market
has suddenly shifted in the wrong direction and something is wrong with the chart. It
should be shorted in this example.