Consolidation refers to periods of trading activity where an asset’s price reflects the indecision of the market. In a bull market consolidation typically occurs after a big move up.

The price will then come back down to retest the former highs, which is also known as “cooling-off”, and will begin to trade sideways within an ever-tightening range.

This continues until the majority of traders settle on a definite direction, either up or down, at which point the price will either break upwards and continue to rise, or break downwards and perhaps initiate a trend reversal.

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