In technical analysis, a series of very similar prices at which a security trades for an extended period of time. For example, if a stock trades between $12.50 and $13.25 for several trading days, this price range is said to be that stock's congestion area. A congestion area indicates that supply and demand for a security are relatively equal; as a result, most technical analysts do not recommend buying or selling such a security until it breaks the congestion area in one direction or another.
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In technical analysis, a horizontal band on a point-and-figure chart resulting from a stock price fluctuation within a narrow price range. Because a congestion area indicates an equality of supply and demand, technicians wait until the stock breaks through the upper or lower bound before committing funds. See also horizontal count.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.