Technical Analysis Explained: Congestion Trading Action Part I

We are talking here about congestion stock trading.

A market in congestion action is a market that oscillates between the limits of congestion, between support and resistance (or, in Drummond Geometry terms, between the dotted line and the block level). It is the market action that occurs within the congestion itself, and when there is no trend. The dotted line is the level created by the higher high of the previous uptrend, or the lower low created by the previous downtrend. The first block level is the low of the first bar to close on the opposite side of the PLdot in an uptrend, or the high of the first bar to close on the other side of the PLdot in a downtrend.

Once you have a sufficient understanding of the theory, characteristics, and patterns of congestion action trading, you can make a lot of money in this type of market. It is like reaping a crop, or slaughtering the fatted calf. Congestion stock trading can be a real bread and butter trade…and what’s more, you can buy the table to hold the bread, and the house to hold the table, and the estate to hold the house and the car, driver, boat, plane, and all the other toys or essentials you want or don’t want. In short, congestion stock trading has great potential for you, if you learn and apply all that is to learn about congestion stock trading.

What is stock trading congestion?

One result of technical analysis explained in this way through Drummond Geometry is that the definitions are clear. The price is in a trend or not. It is not a trend run when after three or more closes on one side of the PL Point, it closes on the other side of the PL Point. And when the market is not in a trend run, then it is congested. Simple and clear.

That first bar when price closes on the opposite side of the trend point is the congestion entry bar. We can say that, by definition, the market is then congested. We know that when the market first goes into congestion, this creates a dotted line and block level. This block level is the first block level of the congestion. So congestion action is the name for that market action that starts with a congestion entry bar and continues for an indefinite period of time until we see three closes on one side of the PLdot, marking the start of a new trend.

Now let’s see how congestion limits are defined and how they can be expanded.

The congestion action defines the congestion parameters, also called congestion limits.

You will recall that the congestion limits are defined by the dotted line and the block level, and that the first block level is set by the congestion entry bar.

But these levels can be expanded. If prices break out of the dotted line, or block level, while still congested (i.e. not showing three closes on one side of the PL Point), then price is redefining the limits of the congestion and we may see a largest established congestion zone. This can continue several times until a new trend appears.

We will continue this discussion of congestion trading in our next article in the Technical Analysis Explained series.