diff --git a/IPython/nbconvert/preprocessors/coalescestreams.py b/IPython/nbconvert/preprocessors/coalescestreams.py
index 5d906a8..f00c3cf 100644
--- a/IPython/nbconvert/preprocessors/coalescestreams.py
+++ b/IPython/nbconvert/preprocessors/coalescestreams.py
@@ -69,7 +69,7 @@ def coalesce_streams(cell, resources, index):
             last.text += output.text
         else:
             new_outputs.append(output)
-        last = output
+            last = output
 
     cell.outputs = new_outputs
     return cell, resources
diff --git a/IPython/nbconvert/preprocessors/tests/test_coalescestreams.py b/IPython/nbconvert/preprocessors/tests/test_coalescestreams.py
index ad476d8..fd9c14f 100644
--- a/IPython/nbconvert/preprocessors/tests/test_coalescestreams.py
+++ b/IPython/nbconvert/preprocessors/tests/test_coalescestreams.py
@@ -14,6 +14,8 @@ Module with tests for the coalescestreams preprocessor
 # Imports
 #-----------------------------------------------------------------------------
 
+from IPython.nbformat import current as nbformat
+
 from .base import PreprocessorTestsBase
 from ..coalescestreams import coalesce_streams
 
@@ -35,4 +37,24 @@ class TestCoalesceStreams(PreprocessorTestsBase):
         self.assertEqual(outputs[1].output_type, "text")
         self.assertEqual(outputs[2].text, "cd")
         self.assertEqual(outputs[3].text, "ef")
-    
+
+
+    def test_coalesce_sequenced_streams(self):
+        """Can the coalesce streams preprocessor merge a sequence of streams?"""
+
+        outputs = [nbformat.new_output(output_type="stream", stream="stdout", output_text="0"),
+                   nbformat.new_output(output_type="stream", stream="stdout", output_text="1"),
+                   nbformat.new_output(output_type="stream", stream="stdout", output_text="2"),
+                   nbformat.new_output(output_type="stream", stream="stdout", output_text="3"),
+                   nbformat.new_output(output_type="stream", stream="stdout", output_text="4"),
+                   nbformat.new_output(output_type="stream", stream="stdout", output_text="5"),
+                   nbformat.new_output(output_type="stream", stream="stdout", output_text="6"),
+                   nbformat.new_output(output_type="stream", stream="stdout", output_text="7")]
+        cells=[nbformat.new_code_cell(input="# None", prompt_number=1,outputs=outputs)]
+        worksheets = [nbformat.new_worksheet(name="worksheet1", cells=cells)]
+
+        nb = nbformat.new_notebook(name="notebook1", worksheets=worksheets)
+        res = self.build_resources()
+        nb, res = coalesce_streams(nb, res)
+        outputs = nb.worksheets[0].cells[0].outputs
+        self.assertEqual(outputs[0].text, u'01234567')