Either-Way Market

An either-way market refers to situations where there appears to be a roughly equal chance of a market to move up as there is for the market to move down.

Notably, technical patterns often can help traders and investors handicap which way the market may move next.

The term either-way market also is used in a specific contexts. In banking for instance, an either-way market exists when there essentially is no margin for a bank, and the bank generally can borrow at the same rate at which it can lend.

An either-way market generally describes sideways price action, or consolidation. Say shares of InvestoCapital, which had been moving generally upward for five years, now moves sideways for a period of roughly eight months. This sideways movement creates what appears to be an either-way market, in which shares can break out either to the upside or downside.

Generally, the longer the period of consolidation, the more movement potential technical analysts see once the stock eventually breaks out from the sideways pattern. Some refer to this sideways movement as a “coiled spring.”  When the same type of pattern appears for the entire market, as opposed to an individual stock, it’s known as a coiled market.

Many traders use Elliot Wave Theory analysis and other technical indicators to help gauge the likelihood the either-way market breaks to the upside or downside.

Similarly, technical analysts often look for so-called triangle consolidation patterns, in which a stock’s trading range becomes narrower and narrower over time as the stock’s pattern generally moves sideways.The triangle’s trading range eventually becomes so narrow that the stock must either break out or break down.

Triangles generally are considered continuation patterns, because they typically result in a return to the prevailing trend. For example, a stock that previously was in an uptrend tends to break out from a triangle pattern.

Most notably, a symmetrical triangle is when the series of market lows narrows at roughly the same rate as market highs. Drawing upper-and lower trendlines results in a symmetrical shape, with the meeting point of those trendlines setting a timetable for an eventual breakout or breakdown. Traders essentially “flip” the triangle from its widest point to determine a price target to the upside or downside, depending on the direction of the market’s previous prevailing trend.

For example, say a stock in an uptrend began to form a triangle pattern over several months, with the high of the triangle at a price of $12 a share, and the low of the pattern at $8 a share. The trading range continues to narrow toward $10 a share, before it finally breaks to the upside. The price target utilizing this pattern would be $14, or the width of the widest point in the triangle from the breakout point.