Option Investor
Glossary

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Consolidation

Consolidation is a period of relative balance between demand and supply. During this time, price fluctuation tends to be rather limited, resulting in a narrow range of trading. If the demand begins to exceed the supply, a breakout to the upside results. Should supply exceed demand, a break to the downside will occur. It is during this time that many investors will take time to re-evaluate their positions, digest any fundamental information changes, including any new news, and adjust their portfolios accordingly. Some investors may close out positions to lock in profits and others may take this period as an opportunity to initiate a new position.