Accumulation:

The process where excess supply of an issue is absorbed by increasing demand from
buyers. Prices usually rise afterwards. Advance/Decline Line: Each day’s declining
issues are subtracted from the day’s advancing issues. The difference is added to
(subtracted from if negative) a running total or sum.

Alpha:
The premium that an investment portfolio earns above a given point of reference; an
issue with a positive alpha is outperforming the market based on its own merits, as
opposed to an issue with a negative alpha, which is underperforming the market based
on its own merits. A measure of stock performance independent of the market.

Ascending Triangle (or Rising Triangle):

A chart formation produced by a series of lows, each successively higher than the last,
and a series of highs that are at approximately the same level. It is considered a bullish
formation when volume increases on the ascending legs. When a breakout through the
level of the highs is made, the pattern is completed.

Average Balance Volume Line:

A simple moving average applied to the tick volume based on a comparison of the
current previous period’s closes.

Average Directional Movement Index (ADX):

Indictor developed by J. Welles Wilder to measure market trend intensity.

Back Testing:
Optimizing a moving average or trading strategy on historical data.

Bar Charts:
Graphical displays of a trading period characterized by vertical lines connecting the high
and low prices, the open and close are marked as ticks respectively to the left and right
of the bar. Time is marked on the horizontal axis at the bottom. Also at the bottom, the
volume of trading for each period is indicated vertically as a histogram.

Bearish:
A longer period of time when prices in the market are generally declining.

Bear Trap:
A false move to the downside that does not start a new downtrend. It is the final reaction
prior to an advance, hence “trapping the bears.”
Blow off:
A sharp price rise accompanied by extraordinary volume; usually leads to an opposite
move.

Bottom:
The low point in a down move.

Bottom Reversal:
The change in the direction of price movement/trend, which occurs at stock market
bottoms

Breadth:
A measurement calculated by comparing the number of advancing issues to the number
of declining issues.

Breadth Ratio:
Computed by dividing the number of advances by the numbers of declines over a given
time period.

Breakaway Gap:
Usually, a high-volume move out of a consolidation pattern without trading at the
pervious period’s levels.

Breakdown:
A price drop below a significant support level or out of a consolidation pattern.

Breakout:
An upward move exceeding a previously recorded high, resistance level, or through a
bullish trendline or some other criteria, often on high volume.

Broadening Top:
A reversal pattern marked by a succession of at least three generally higher highs
alternating with successively lower lows. Occurs after a notable price rise. The pattern is
completed by a third breakdown, normally to a significantly lower low.

Bullish:
Generally a longer period of time in which prices rise.
Bull Trap:
Occurs when in a bear market prices suddenly rise, luring in bulls taking long positions
before resuming the downtrend.

Candlestick Charts:
A charting technique developed in Japan in the 1700s. The high and low for the time
period are described as shadow and plotted as a single line. The price range between
the open and the close is plotted as a box or rectangle on the line. If the market closes
above the open, the body of the box is white or empty. If the close is below the open,
the body of the box or rectangle is black or filled.

Channels:
The area between two parallel trendlines, the upper trendline connecting most of the
important price peaks or closes and the lower trendline connecting the important lows or
closes.

Charts:
Graphical representation of price, volume and/or other data over a period of time.
Commonly used in technical analysis are Bar Charts, Line Charts, Point and Figure
Charts and Candlestick Charts.

Climax or Selling Climax

The end of a protracted period of selling, characterized by high volume, forced margin
selling, extreme degrees of negative market breadth and panic. A climax marks the end
of one of the late phases of a decline with an abrupt reversal.

Confirmation:
Occurs when the action of one indicator or technical tool backs the action of another.

Congestion Area:
A price area where previous heavy volume trading has occurred. It is considered a likely
area to find support or resistance in the future.

Consolidation:
A generally lateral period of trading in terms of price. It is usually an interruption of an
ongoing uptrend or downtrend, as opposed to a reversal type of pattern

Continuation Pattern:
A consolidation that temporarily interrupts a rally or declines and sets the stage for
another move in the same direction.
Cycle:
A variation where a point of observation returns to its origin.

Demand:
Buying interest from investors. Theoretically, creates support.

Descending Triangle:
A continuation pattern with bearish implication. Volume is normally higher at the lows
and decreases as the upper, downsloping trendline is approached. A break below the
lower horizontal line of the pattern, on increased volume completes the pattern and
reaffirms the downtrend in progress.

Distribution:
The process where demand is absorbed by expanding supply. Prices usually fall
afterwards.

Divergence:
Occurs when one indicator moving, not in conjunction or agreement with another
indicator. Such nonconfirmations often signal reversals.

Doji:
A session in which the open and close are the same (or almost the same). Different
varieties of doji lines (such as gravestone or long-legged Doji) depend on where
opening and close are in relation to the entire range. Doji lines are among the most
important individual candlestick lines. They are also components of important
candlestick patterns.

Double Bottom:
A reversal type chart pattern distinguished by two successive declines, both terminating
at approximately the same level. When completed, accomplished by a rise on volume
above the high between the two lows, the pattern often resembles the letter W.

Double Top:
A reversal type chart pattern (the observe of the Double Bottom) whish resembles the
letter M.

Dow Theory:
A description of market behavior, invented by Charles Dow, which divided price moves
into three types of trends: major (lasting from months to years), intermediate (weeks to
months) and minor (days to weeks). A primary corollary is that of mutual confirmation of
moves by both the Industrial Average and the Transportation Average.

Downside Volume:
A period’s summary of the volume transacted in all stocks, which fell in that period.

Elliott Wave Theory:

A theory of market behavior published by Ralph Nelson Elliott in the 1930s. According
to the theory, the stock market follows a pattern of five waves up and three waves down
to form a complete cycle.

Engulfing pattern:
In candlestick terminology, a multiple candlestick line pattern; a major reversal signal
with two opposing-color real bodies making up the pattern.

Envelope:
Lines surrounding an index or indicator that is, trading bands.

Equilibrium Market:
A price region that represents a balance between demand and supply.

Evening Star Pattern:

The bearish counterpart of the morning star pattern; a top reversal, it should be acted
upon if it arises after an uptrend.

Failure:
In Elliott wave theory, a five-wave pattern of movement in which the fifth impulse wave
fails to move above the end of the third, or in which the fifth wave does not contain the
five subwaves.

Fibonacci Ratio:
The relationship between two numbers in the fibonacci sequence. The sequence for the
first three numbers is 0.618,1.0,and 1.618 in general terms the fibonacci series is
1,1,2,3,5,8,13,21,34,55,69,ect.

Flag:
A brief consolidation pattern within a steep advance (or decline) generally in the form of
a compact rectangle, tilted against the prevailing trend, and resembling a flag.
Golden Mean or Golden Ratio:
The ratio of any two consecutive numbers in the Fibonacci sequence, known as phi and
equal to 0.618; a proportion that is an important phenomenon in music, art, architect
and biology.

Harami:
In candlestick terminology, a small real body contained within a relatively long real body.

Head and Shoulders Top:

A pattern characterized by a series of three peaks, the first and third being lower than
the middle. Volume, heavy on the first peak, declines on the next two. Completion is
marked by the breaking of the “neckline” ( an extension of the line connecting the
troughs between the three peaks) accompanied by heavy volume. An inverse head and
shoulders is the same pattern upside down volume increase through the pattern.

Historical Data:
A series of past daily, weekly or monthly market prices (open, high, low, close, volume
and open interest).

Impulse wave:
A wave or cycle of waves that carries the current trend further in the same direction.

Indicators:
A subset of market measuring tools used specifically for monitoring and forecasting.

Inside Day:
A period in which the total range of prices is within the range of the pervious period’s
price range.

Intermarket Analysis:
Observing the price movement of one market for the purpose of evaluating a different
market.

Intermediate Term:
Refers to a period of time often measured in terms of weeks or months.

Island Reversal:
A trading range where there is an exhaustion gap up, then prices trade in a narrow
range for a few days, and then there is a breakaway gap down. This leaves a sort of
island of prices in the middle. The reverse happens at an island bottom reversal.
Long:
Establishing ownership of the responsibilities of a buyer of a tradable; holding securities
in anticipation of a price increase in that securities.

Long Term:
Refers to a period of time often measured in terms of months or years.

Market Sentiment:
Crowd psychology, typically a measurement of bullish or bearish attitudes among
investors and traders.

Market Timing:
Using analytical tools to devise entry and exit methods.

Mean:
When the sum of the values is divided by the number of observations.

Momentum:
The strength or sustainability of a market move as measured by both volume and price.

Momentum Indicator:
A market indicator utilizing price and volume statistics for predicting the strength and
weakness of a current market and any overbought or oversold conditions, and to note
turning points within the market.

Moving Average:
A continuous smoothing technique computed by averaging a series of numbers (price,
volume, ect.) progressively over a period of time. Often plotted on a chart with the raw
data.

Moving Average Crossover:

The point where the various moving average lines intersect each other or the price line
on a moving average price bar chart. Technicians use crossovers to signal price-based
buy and sell opportunities.

Moving Average Convergence/ Divergence (MACD):

The crossing of two exponentially smoothed moving averages that are plotted above
and below a zero line. The crossover, movement through the zero line, and divergences
generate buy and sell signals.
On Balance Volume:
A price/volume type of indicator where the volume for the period is added to a
cumulative total if the price rose and subtracted if the price fell .No entry is made if the
price was unchanged.

Oscillator:
Technical indicator used to identify overbought and oversold price regions. An indicator
that detrends data, such as price.

Overbought:
A market condition wherein a stock, group or markets has recently extended or
exceeded its normal range of movement on the upside. The condition implies a near
term reversal is imminent.

Oversold:
A market condition wherein a stock, group or markets has recently extended or
exceeded its normal range of movement on the downside. The condition implies a near
term reversal is imminent.

Pattern:
A distinctive formation created on a chart by the up and down movement of prices. For
example, head and shoulders, triangle, and double top.

Pennant:
A brief triangular consolidation.

Pivot Point:
The average of the high, low and close of a given period. Acts as support and
resistance. Another, definition for the Pivot Point is the bottom or top of the first pullback
after a major market move.

Point and Figure Chart:

A method of charting in which only price changes (of a specific unit) and the direction of
change are the variables. Time and volume dimensions are disregarded. Price data are
plotted on graph paper. New columns are begun when a reversal by at least one unit
can be recorded. Advances are marked with “X”s, while declines by “O”s.
Pullback or Trader’s Remorse:
A relatively rapid return, after a breakout, to the boundary area of the preceding pattern.
It is usually characterized by light volume.

Rally or Reaction:
Price movement in the opposite direction to a issue’s overall trend.

Relative Strength:
Price performance of a stock or group of stocks compared to a given norm, such as the
CMA or MWTA.

Relative Strength Index:

An indicator invented by J. Welles Wilder and used to ascertain overbought/oversold
and divergent situations.

Resistance:
A supply of stock waiting to be sold at a price above the current level. Significant
trading at that level has previously created a pattern which suggests there would be
resistance to the price moving significantly above that level without a great deal of
stock changing hands.

Retracement:
In the Elliott Wave Theory, refers to a minor move against the primary trend where the
length is mostly a Fibonacci percentage of the previous move.

Reversal:
A shift in the direction of the price movement caused by a change in demand and/or
supply. Generally the longer the reversal pattern takes to develop, the more serious its
implications.

Saucer:
A gently curved chart formation resembling a saucer. The formation takes an extended
period to complete, occasionally as much as half a year. A similar pattern is traced by
the volume, which accompanies it.

Sentiment Indicators:
Indicators, which attempt to gauge individual investor and/or professional attitudes
towards the market. Monitoring the degree of optimism or pessimism present is a major
tenet of technical analysis.
Simple Moving Average:
The arithmetic mean or average of a series of prices over a period of time. The longer
the period of time studied (that is, the lager the denominator of the average), the less
impact an individual data point has on the average

Spike:
A chart pattern revealing a sudden or extreme move to a new high or low. These
formations are followed by an equally extreme move in the opposite direction.

Standard Deviation:
The positive square root of the expected value of the square of the difference between a
random variable and its mean. A measure of the fluctuation in a stock’s monthly return
over the preceding year.

Stochastic Oscillator:
An overbought / oversold indictor that compares today’s price to a preset window of
high and low prices. These data are then transformed into a range between zero and
100 and then smoothed.

Support Level:
An area or price level where a price decline may be expected to be halted (or to slow)
by an increase in demand.

Technical Analysis:
A form of market analysis that studies demand and supply for securities and
commodities based on trading volume and price studies. Using charts and modeling
techniques, technicians attempt to identify price trends in a market.

Top or Tops:
A period of distribution. The high point of an upward move or one of several recognized
reversal patterns.

Trend:
A move in price either upward or downward characterized by a series of higher lows
and higher highs (uptrends) or lower highs and lower lows (downtrend).

Trailing Stop:
A stop-loss order that follows the prevailing price trend.
Trend-Following:
Moving in the direction of the prevailing price movement.

Trendline:
A line, which is drawn through successive maximum price movements, i.e., through a
series of two or more successively lower peaks (downtrend) or successively higher
troughs (uptrend). The more instances of contact, the more the line is reinforced.

Triangle:
Narrowing of a trading range formed by a series of lower highs as well as higher lows.
The pattern is completed by an often-sharp high volume break through either of the
converging trendlines.

Triple Top:
Similar to a double top, though much rarer, but with three peaks instead of two. The
pattern is completed when the price declines below the second reaction low.

Tweezers Bottoms and Tops:

Candlestick formations. Both candles must have identical highs and lows. Significant
when found at contract highs or lows, and can indicate a breakout.

V Pattern:
A price pattern resembling the letter V, characterized by a sharp downward move
followed immediately by a rapid upward progression, which is often accompanied by
heavier volume.

Wave:
In Elliott wave theory, a sustained move by a market’s price in one direction as
determined by the reversal points that initiated and terminated it. Wave Cycle: An
impulse wave followed by a correction wave, the impulse wave being made up of five
smaller, numbered waves of alternating direction designated 1,2,3,4 and 5 , and the
correction wave being composed of three smaller alternating waves designated a, b and
c.

Wedge:
Similar to the triangle but with both converging trendlines, trending sharply in the same
direction. An upward or downward slanting triangle (rising wedge, falling wedge). It can
be either a continuation pattern or a reversal pattern.
Zigzag:
In a bull market, an Elliott three-wave patter that subdivides into a 5-3-5 pattern with the
top of wave B noticeably lower than the start of wave A. In a bear market, this pattern
will be inverted.