When the trading range narrows and volatility decreases, the market may be entering a "breakout mode." Breakouts in either the upside or downside are possible, and the direction cannot be determined prematurely. A narrowing trading range only indicates a temporary balance between buyers and sellers; it doesn't guarantee a strong trend will follow. The first breakout may fail. After a large breakout candlestick, the key is whether there is follow-through in the same direction. If the highs and lows are constantly contracting and candlesticks are overlapping significantly, avoid trading back and forth in the middle. Wait for a strong breakout with follow-through, or wait for a pullback after the breakout to hold before considering entering the market in the direction of the trend. If the price quickly returns to the trading range, treat it as a failed breakout. Price Action