Process by which, over a period of time, a large or excess supply of futures contracts is absorbed by increasing demand from buyers. Generally, there is little price action until the sellers have been exhausted. Then buyers dominate and price tends to rise.
The number of stocks or bonds or commodities which have advanced in a given time period compared to the number which have declined. The difference (breadth) is considered important in gauging the strength or weakness of the market. Daily observations are the most common.
The number of stocks advancing divided by the number of stocks declining over a particular time period. See Breadth Ratio.
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. See Breadth.
The point of intersection of two trendlines. A new trend may develop as prices approach the intersection.
Ascending Triangle (or Rising Triangle):
A chart pattern containing 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 and previous period's closes. See also Tick Volume.
Optimizing a moving average or trading strategy on historical data.
Graphical displays of the trading in a security, bond, index, option or average characterized by vertical lines connecting the high and low prices for a specific period (day, week, month, year). The close of the period is marked with a short crossbar on the vertical line. Price or level is scaled arithmetically or semi-logarithmically on the vertical axis. 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.
This chart pattern is formed after a decline by a considerable amount of trading occurring within a relatively narrow price range. The formation is completed when an upside breakout occurs. Bear Market: When the longer-term trend of security prices is down. When viewed within the four-year cycle, a bear market can often last a year or more.
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." Opposite of Bull Trap.
A sharp price rise, accompanied by extraordinary volume; usually the culmination of an extended advance, leading to a sharp reaction.
The low point in a down move. Bottom Reversal: The change in the direction of price movement/trend which occurs at market bottoms.
A measurement calculated by comparing the number of advancing stocks to the number declining. The more net advances seen in an up market, the greater its breadth; vice versa for down markets.
Computed by dividing the number of advances by the number of declines over a given time period, usually a day or a week.
Usually, a high-volume move out of a consolidation pattern. The strength of buying is sufficient to cause the security to jump to higher levels without trading at the intervening prices. A strong, sustained up move is normally indicated.
A price drop below a significant support level or out of a consolidation pattern. Caused by sellers overwhelming buyers, it usually signals either the beginning or the resumption of a downtrend.
An upward move exceeding a previously recorded high, resistance level, or through a bullish trendline or some other criteria, often on high volume.
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.
Occurs when in a bear market prices suddenly rise, luring in bulls taking long positions before resuming the downtrend.
A charting method 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.
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. Price reversals are expected to occur when prices approach either boundary.
Graphical representations 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, Candlestick Charts and Market Profile.
A hesitation in a trend that usually leads to a reaction. Volume is relatively high with little price progress.
Climax or Selling Climax:
The culmination or end of a protracted period of selling, characterized by high volume, forced margin selling, extreme degrees of negative market breadth (also in prior years a late ticker tape) and panic. A climax marks the end of one of the late phases of a decline with an abrupt reversal. While the market may again retreat, sometimes even to new lows, the climax is an obvious milepost to the beginning of the end of the bear market.
Occurs when the action of one indicator corroborates the action of another. The implication is confidence that the trend will continue. The lack of such confirmation is often called divergence.
A price area where previous heavy volume trading has occurred. It is considered a likely area to find support or resistance in the future.
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.
A consolidation that temporarily interrupts a rally or decline and sets the stage for another move in the same direction.
A price swing opposite in direction to that of the main trend. Major corrections can generally be one-third to two-thirds of the previous gain or decline.
A point and figure technique used to estimate a price objective or target--up or down. Calculations are based on the extent of prior sideways movements.
Buying interest from investors. Theoretically, creates support.
The converse or opposite of an Ascending Triangle. A continuation pattern with bearish implications. 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.
The process by which demand is more than compensated for by expanding supply. Over a period of time, increasing supply has a negative effect on the price of a stock. Stocks under distribution are often signaled by broadening, rounding, or double or triple tops.
An action by one indicator moving, not in conjunction or agreement with another indicator, but rather counter to or short of it. Such nonconfirmations often signal reversals.
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.
A reversal type chart pattern--the obverse of the Double Bottom--which resembles the letter M.
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, i.e. a significant move by one average must be confirmed by a similar move in the other. This action provides the theory with the signals.
A daily, weekly or monthly summary of the volume transacted in all stocks which fell in the period. More loosely, down volume alludes to heavy volume during a period of generally declining prices.
Elliott Wave Theory:
A theory of market behavior published by Ralph Nelson Elliott in the 1930s. According to the theory, the market follows a pattern of five waves up and three waves down to form a complete cycle.