Volatility contraction

Successively smaller bars

What it is

A sequence where each swing is smaller than the last and daily ranges shrink.

What it may suggest

Energy building. Expansions tend to follow contractions, often sharply.

Where it fails

Says nothing about direction, and can persist far longer than expected. Positioning early usually means being stopped out by the noise before the move.

Also called squeeze, compression.

More chart patterns

Double bottomTwo failed attempts at the same low
Bear flagSharp move down, tight drift up
WedgeBoth boundaries sloping the same way, converging
Ascending triangleFlat ceiling, rising floor
Descending triangleFlat floor, falling ceiling
Symmetrical triangleBoth boundaries converging

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