Definition ∞ Technical consolidation describes a period in market price action where an asset trades within a relatively narrow range, indicating a balance between buying and selling pressures. During this phase, the asset’s price typically moves sideways, following a prior upward or downward trend. It often represents a period of indecision or accumulation/distribution before a new significant price movement. This market behavior is a common precursor to a breakout or breakdown.
Context ∞ Reports on technical consolidation frequently highlight the potential for future price volatility once the asset breaks out of its established range. Analysts often scrutinize volume patterns and chart formations during consolidation to predict the likely direction of the next market move. Understanding technical consolidation is important for traders seeking to identify opportune moments for entry or exit, as it suggests a pending shift in market dynamics.
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