Consolidation can cause traders much pain, and screw up trading performances – but if you take a step back and look at the structure of consolidation, you can work with it.
General rule of thumb is to avoid trading inside consolidation, but rather trade the consolidation structure breakout.
Check out this price squeeze structure – sometimes called a pennant or wedge.
Generally when these bad boys decide to breakout, you can get violent follow through moves. Last session a break above, close above event did occur outside the consolidation containment lines.
Notice I said close above, because these patterns are known to produce many fake outs to trick traders into thinking a genuine consolation breakout is about to occur.
Last session a bullish outside candle formed, and closed out side of the pattern. This is a bullish event and we will most likely see higher prices develop from this price action.