Consolidations are periods when the markets tend to fluctuate for a period of time between lower and upper limits. At these times, it is often relatively easy to trade, you buy when it is near the lower limit (the 'Support' level) and sell when it has reached the upper limit (the 'Resistance' level). The more these levels are 'tested' (the more times they are reached), the stronger the level. The strength of a 'break out' (up or down) of the consolidation boundaries is usually fairly proportional to the number of times the level has been tested. The more times a level has been 'tested', the stronger the 'break out' will be.
Consolidations are very good indications of a continuing move. The next move up or down will often be the same distance again. A consolidation generally reflects about half of a move. When a consolidation breaks out, a continuation move is not usually likely and the move is usually in the reverse direction.
During these times of consolidation, analysts tend to wait for the breakout to happen. The direction of the breakout is usually the same direction as that of the move entering the consolidation period. So, if a consolidation occurs after an upward move, you can generally expect the breakout to occur in an upward direction.
If you think a breakout is about to occur, it is often an accurate method to use by checking whether the date is very near a bad aspect between the Sun and Jupiter (opposition or square), or leads into a good aspect (trine, sextile or conjunction). This can help considerably in determining the direction of a new trend.
Because of the global knowledge and popularity of consolidation breakout theory, a somewhat self-perpetuating phenomenon tends to occur at times of these breakouts. As the level is broken through, the thousands of people and computers monitoring these trends buy or sell in sympathy with the new direction, causing an additional impetus. The longer the consolidation period (the more the limits have been tested), the easier it is to identify and act upon. This can often create some difficulty when attempting to trade, causing a second consolidation at a new set of levels. At times like these, it is generally best to set break-even stops at the previously tested level. This allows the new trend to manifest with little risk to the investor.
This kind of mechanical trading has definite merits, but is not entirely without risk. Sometimes market volatility can be so intense that a trader simply cannot enter or exit the trend at the desired time. Because of this, it is recommended that a trader should look at his own planetary transits during the entire consolidation period to see whether the generally-accepted astrological aspects to the trader's birth-chart indicate whether this is a favourable period or a time not to trade at all.
A trader does not need to know the first thing about astrology in order to use the planetary transits to support strategic decisions. It is recommended that the decision to trade should first be made, and then use a transit calculating program to add the final bias. To download a program that will accurately and objectively report on the favourability of your transits, click here
The validity of this transit information can easily be tested by seeing what the program recommended during both successful and unsuccessful trades made during your past.