A ranging market is one in which price bounces in between a specific high price and low price. The high price acts as a major resistance level in which price can't seem to break through. Likewise, the low price acts as major support level in which price can't seem to break as well. Market movement could be classified as horizontal or sideways. The basic idea of a range-bound strategy is that a stock has a high and low price that it normally trades between. By buying near the low price, the trader is hoping to take profit around the high price. By selling near the high price, the trader is hoping to take profit around the low price. Popular tools to use are channels such as the one shown above and Bollinger bands. Using oscillators, like Stochastic or RSI, will help increase the odds of you finding a turning point in a range as they can identify potentially oversold and overbought conditions.
Chart Analysis
