Congestion patterns, such as triangles, often look like coiled springs. Paradoxically, this wound-up appearance predicts the return of rapid price movement.
A congestion pattern has been forming between 7700-8150 basis the March CBOT mini-sized Dow contract. There is also a gap in the charts at 7500-7570. I would buy on a move down into the gap area with a stop below the October 10 low.
These short-term congestion patterns have stood the test of time as one of the most reliable methods of technical analysis. The flag and pennant pattern focuses only on short pauses in a dynamic market.
If neither an uptrend nor downtrend is occurring, then a congestion pattern (going sideways) is occurring, which we’ll review in a bit.
Fig 1.6 below is a very basic example of a down trend: ...
The three peaks are well separated and are not part of a congestion pattern. The peaks do not have to be precisely at the same level.
What is offered to you from this knowledge? Whichever way the market was going as it went into the congestion pattern is the way the market will move when it moves out of that pattern.
General Comments Gold and silver reversed, getting ahead of a dollar bull run that should set fresh near term highs this week. Oil and some grains have setup congestion patterns awaiting the next moves by the stock and currency markets.
 See also: Pattern, Trading, Short, Congestion, Market
  
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