Technical Analysis for Beginners

1.Accumulation-A period when buyers start to appear and start buying assets,
usually from struggling sellers. It can be viewed as a time when shares are ab-
sorbed by growing demand over time, potentially having a positive impact on
price, or as a time when prices stabilise after a decrease. This might be seen as
the start of a bull market or possibly the first phase of a bull trend.

2.Advance-Decline Line- Divide the number of stocks rising by the number of

stocks falling during a specific time frame.

3.Apex-A peak or the point where two trendlines converge, with the implication
that a new trend may develop as prices approach the point of intersection.

4.Arbitrage-Simultaneous purchasing in one market while selling in another in

order to profit from price disparities. The acquisition of the acquiree and sale of
the acquirer as it relates to shares are two possible transactions. Purchasing one
futures contract and then selling a similar contract in order to take advantage of
market inefficiencies.

5.Bar Chart-A price/time chart with time intervals on the horizontal axis and bars
representing high, low, and close data is shown. Usually, behind the relevant
price data at the bottom of the chart, volume is also shown as vertical bars.

6.The base-Accumulation period (see above), is also known as the “Bottom.” Can
also be referred to as a pricing point when purchasers keep making purchases
to support the market.

7.Bear Market-An extended period, frequently lasting a year or longer, during

which the price of securities is generally declining.

8.Bear Trap- A deceptive downward movement that doesn’t signal the start of a
new downturn but rather the last reaction before a long gain, thereby “trapping
the bears.”

9.Breadth-Total number of rising versus falling equities. Breadth is positive when

increases outweigh decreases; when the opposite is true, breadth is negative.
10.Breakout-When a stock’s price or volume surpasses its prior high or low (or a
level of support or resistance) or any other set standard. Likewise known as “Pen-
etration.”

11.Bull Market-An extended period, usually lasting a year or longer, during which
time the price of securities has often increased.

12.Bull Trap-A fake upward movement that doesn’t signal the start of a new up-
swing but rather the last rise before a long collapse, thereby “trapping the bulls.”
A powerful rise during a “Bear Market” that deceives purchasers into thinking the
market is turning upward is known as a bull trap.

13.Climax-(Climatic highpoint or low point). abrupt trend reversal characterised

by significant volatility and high relative volume.

14.Confirmation-At the same time, two or more trends or momentum indicators

are extending their trends to new highs (or lows). The inference is that there is
optimism about the future of the trend. Frequently used to compare the Dow
Jones Transportation Average to the Dow Jones Industrial Average.

15.Consolidation-A trend reversal that is expected to continue in the same direc-

tion after pausing. Usually taking place much sooner than stabilisation.

16.Continuation Pattern-Consolidation phase, usually of brief length, that mo-

mentarily halts an upward or downward movement and prepares the way for a
subsequent move in the same direction.

17.Correction-A change that goes against a trend but won’t stop it or make it go
the other way. typically takes more time than a reflex rally or reflex response.

18.Distribution-Process wherein an increasing supply of a stock outpaces

demand, which over time has a negative impact on the price of the stock.
Although the price trend is often neutral throughout this time, there is frequently
substantial volatility.

19.Divergence-While another measure succeeds in continuing its trend to a new

high (or low), the first measure fails to do so. Less confidence is expressed in
maintaining the trend as a result. Frequently used to compare the Dow Jones
Transportation Average to the Dow Jones Industrial Average.
20. Extended-When a stock has moved past or beyond the limits of its trend and
a consolidation is expected.

21. Gap-When a stock’s daily high and low prices do not coincide with that
stock’s daily high and low. Or, when an instrument trades above or below the
high or low of the previous day and continues in that direction. It is known as a
breakaway gap when a gap starts a trend; an exhaustion gap stops or reverses
a trend; measurement gaps typically replicate the most recent move made
before to the gap.

22. Momentum Indicators-Momentum indicators are tools used to assess over-

bought and oversold market circumstances as well as the underlying strength or
weakness of current market movements. They are typically tied to price and
volume. The majority use moving averages.

23. Moving Average-To smooth patterns of small variations, the average of price
or volume over time is utilised.

24. On-Balance Volume-A measure of cumulative volume, the direction of which

depends on price movement; for example, a rising price suggests rising volume
for that particular time period, whereas a falling price change indicates falling
volume.

25. Oscillator-An indicator that shifts to a positive or negative extreme near zero
to gauge the strength of momentum (or sentiment) activity. The computations
commonly employ moving averages.

26. Overbought– The price has stretched to the upside too quickly.
27. Oversold- The price has extended to the downside too quickly.
28. Point and Figure- A chart type for tracking price activity without taking into
account volume or time. A pure price charting technique is called Point and
Figure.

29. Relative Strength Line-A stock’s (or group’s) price performance line against a
broad market index (or a group of stocks, or another stock). It is calculated by
subtracting the cost of a sock from the market index for each time period, and
then drawing a line through the ratios that are obtained.

30. Resistance-A price level where it is anticipated that selling will outpace
demand and momentarily halt or reverse an advance.

31. Reversal Pattern-A distinctive pattern that marks the end of an upward or
downward trend.
32. Sentiment Indicators– Indicators that are employed in an effort to track shifts
in the psychology of investors.

33. Stop Loss- The price level that, if exceeded (on the upside in a short position;
on the downside in a long position), negates a reversal pattern or breaks the
trend. Typically, the point is slightly above a resistance level or just below a sup-
port level. Sometimes referred to as “Protection Point” or “Failsafe Point.“

34. Support- A price point where buying is anticipated to pick up enough steam
to momentarily halt or reverse a slide.

35. Trendline- A line that, on a graph, links two or more points and symbolises the
slope of movement.

36. Volatility- Degree in intraday fluctuation, not necessarily correlated with price
movement over time.

37. Volume-Total trading activity in a stock or set of stocks over a certain time
period is known as volume. It is typically shown as vertical bars at the bottom of
a bar chart.

38. Wedge– A pattern in which only slight advancement is made, such as rising
tops and bottoms in an uptrend or falling tops and bottoms in a downtrend, and
which typically heralds a trend reversal.