Tight Consolidations After New Highs

The range over the last week has been extremely tight. On 7/20/16 SPY closed at a 50-day high. Every SPY close in the 5 days since 7/20 has been within the intraday range of that 7/20/16 bar. (And it wasn’t even that big of a range.) It is said that consolidations are often resolved in the direction of the trend. This guideline suggests that we’re more likely to see another leg up from here than a breakdown. The study below tests this concept.

2016-07-28 image1

It certainly appears to confirm the old technical adage. Results favor the long side over the immediate 3-day period and they are even more impressive when looking out 8 to 10 days.


Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

About the author:

. Follow him on Twitter / Facebook.