When stock prices start to move within a certain range, falling to known lows and then rising to known highs before falling again, this is called a "consolidation" or "congested" phase.
Most of the time, you can see typical consolidation patterns. The most common is the rectangle pattern, which is also known as a price "corridor" or channel.
When prices start to go down, traders get nervous, and weak holders will sell their stocks so that prices fall to a level that other traders will consider a good price to buy at. From that point on, stock prices will go back up, often with a lot of volume as people buy the stock.
As the stock price gets better and goes up, it will reach a peak where traders who bought the stock when it was cheaper will sell. At the same time, weak investors who bought the stock at higher prices may want to sell because their losses are now smaller because the prices have gone up. At that point, the stock price runs into resistance, and it tops out, making a peak.
When you connect the prices where the price bottoms out and the prices where it tops out, you get the shape of a channel or a rectangle.
During phases of consolidation, prices move between the bottom of the channel or rectangle and the top of the channel or rectangle.
From a technical point of view, trading during congestion phases will be a good time to use oscillators. The key is to figure out where the bottom of the channel is and buy when prices are close to it. Sell when prices reach the top of the channel or rectangle.
Beginner traders often make the mistake of sticking with their trend-following trading system even when prices are moving in a small range, which can cause a lot of whipsaws.
When you move from a bullish market to a bearish market, you should be happy with the smaller gains that come from trading during the choppy and steady phases. Use oscillators to keep an eye on your stock prices and trade them based on where they are in the price rectangle pattern, which is easy to see on your stock chart.
