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What are the characteristics of four phases (Consolidation, Breakout, Runaway and Exhaustion) of trend?
Consolidation(Area GAP): The GAP appears between demand and supply zone(non trending area) with low volume, the GAP might appeared due to external support and will get filled in near term. This does not signify the strength of the buyer or seller.
Breakout: The GAP appears just after the breakout area with high volume indicates the strength of buyer(in bullish scenario)/seller(bearish scenario). this indicates the start of the trend. This GAP will not be filled and shows the forward trend.
Runaway: The GAP appears on the trending area after breakout point with significant volume. This indicates the pressure from the seller(in bullish)/buyer(in bearish) to exit from their position, which shows their weakness. This GAP is expected not to be filled and shows the forward trend.
Exhaustion GAP: This GAP appears similar to runway at the start of the day. i.e, the current opening is much higher than previous highest price but gets filled during the day with high volume and no GAP is seen by EOD(in bearish scenario). This indicates that the reversal may take place and terminate the current trend.
Consolidation :-
1. During this stage the gap will appear inside the trading range.
2. The gap created gets filled easily.
3. The volume during the consolidation stage is generally low.
Breakout : –
1. Break out Gap appears when the price breaks out from its trading range.
2. The volume during the break out day is usually very high.
Runaway :-
1. Runaway Gap appears after the breakout.
2. The close will be at its day’s High during the Runaway Gap.
3. The volume is evenly distributed during the day.
Exhaustion :-
1. The gap that appears after the breakout from the trading range ( Runaway Gap) gets filled in a same day.
2. The close usually will be at its day’s low after forming the runaway Gap.
3. The volume will be generally very high during the day to terminate the existing trend.
CONSOLIDATION This occurs in the area GAP which occurs in the trade range of the stock
The GAP is filled soon and the volume will also be low
This phase is of no importance to the trader
BRAKE OUT This occurs beyond the trade area (ie either above the resistance level or below the support level)
VOLUME must be HIGH indicating the START of the respective bull/bear trend
RUNAWAY This occurs in the existing BULLISH/BEARISH TRENDING AREA
VOLUME must be HIGH indicating the panic of the sellers/ buyers in the bull / bear trend respectively
This is the boosting phase of the trend
EXHAUSTION This also occurs in the existing BULL/BEAR TRENDING AREA at the opening of the day but gets filled by the end of the day
Even though there is volume this is the END of the current bull/bear trendConsolidation: This is also known as area gap. this appears within the trading range with a high volume. This gap can be filled.
Breakout gap: When the price moves up from the trading range and gives a breakout with a gap with a high volume. This gap may not be filled.
Runaway gap: When the price breakout from the trading range, the sellers are forced to buy back hence increasing the demand. The gap may not be filled.
Exhaustion: When the price opens up with a gap but in turn closes near to the previous day closing the gap known as exhaustion gap.
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