The 100-day moving average is a popular technical indicator which investors use to analyze price trends.It is simply a security's average closing price over the last 100 days.
The 150-day moving average is a popular technical indicator which investors use to analyze price trends.It is simply a security's average closing price over the last 150 days.
The 200-day moving average is a popular technical indicator which investors use to analyze price trends.It is simply a security's average closing price over the last 200 days.
The 50-day moving average is a popular technical indicator which investors use to analyze price trends.It is simply a security's average closing price over the last 50 days.
The Arms Index (Trin) uses the ratio of advancing issues to declining issues to signal when the market is deeply overbought or oversold. The Arms Index is named after its designer, Richard Arms.
The ascending triangle is marked by two significant technical features.At its top, there is a line of resistance.
Average true range (ATR) is a technical indicator that measures the volatility of an asset's average daily price movements. Average true range starts with the concept of "true range." True range (TR) is calculated by choosing the largest number from the following: Current high less current low Current high less previous close Current low less previous close Use the absolute value of each metric to ensure positive numbers and pick the largest.
A bearish engulfing pattern occurs in the candlestick chart of a security when a large black candlestick fully engulfs the small white candlestick from the period before. This pattern usually occurs during an uptrend and is believed to signal the start of a bearish trend in the security. The bearish engulfing pattern can be illustrated in the following manner using candlestick charting: In this example, the smaller white candlestick is overshadowed (or engulfed) by the larger black candlestick.
Bollinger Bands are used as a technical analysis indicator.They are formed by using a 20-day moving average as a centerline and then tracing two bands, each one standard deviation wide, on either side of the moving average.
Breadth of market theory refers to a concept that the number of securities rising or falling in a market can predict the future strength of that market. The breadth of market theory is employed in technical analysis to predict market strength.
A bullish engulfing pattern occurs in the candlestick chart of a security when a large white candlestick fully engulfs the smaller black candlestick from the period before. This pattern usually occurs during a down trend and is thought to signal the beginning of a bullish trend in the security. The bullish engulfing pattern can be illustrated in the following manner using candlestick charting: In this example, the smaller black candlestick is overshadowed by the larger white candlestick.This indicates the stock opened the second period lower than the previous close and tried to fall lower during the trading period.
Candlestick charts are often used in technical analysis to track price movements of securities, derivatives and currency over time. Each candlestick is made up of three parts: the upper shadow, the lower shadow, and the real body.
A Chartered Market Technician (CMT) is an individual who has been certified by the Market Technicians Association. The Market Technicians Association (MTA) grants the Chartered Market Technician (CMT) designation to candidates who have shown proficiency in technical market analysis as demonstrated in a series of three professional examinations.
Named after famous ballroom dancer Nicolas Darvas, the Darvas box theory is a trading technique based on 52-week highs and volumes. To implement a Darvas box technique, an investor simply looks at stocks with heavy trading volume and then buys those stocks when they rise above their 52-week highs.
Data smoothing is a statistical technique that involves removing outliers from a data set in order to make a pattern more visible. For example, let's say that a university is analyzing its crime data over the past 10 years.
A death cross is a technical indicator that occurs when a stock's short-term moving average falls below its long-term moving average. Market technicians believe moving averages define the trend and provide support or resistance.
The descending triangle is a pattern observed in technical analysis.It is the bearish counterpart of the bullish ascending triangle pattern.
A doji candlestick is a significant signal in the technical analysis of financially traded assets. If prices finish very close to the same level (so that no body or a very small real body is visible), then that candle can also be read as a doji. There are four types of doji candlesticks -- common, long-legged, dragonfly and gravestone.
The double bottom -- one of the many charting patterns used in technical analysis -- is characterized by a fall in price, followed by a rebound, followed by another drop to a level roughly similar to the original drop, and finally another rebound. The double bottom charting pattern is among the most commonly occurring charting patterns, and closely resembles the letter "W".
Dow Theory is an analysis that explores the relationship between the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA).When one of these averages climbs to an intermediate high, then the other is expected to follow suit within a reasonable amount of time.
A dragonfly doji is the most uncommon candle of the four different types of doji candlesticks.As with any doji, the dragonfly depicts a situation in which supply and demand are in equilibrium, thus possibly signaling an important reversal.
The bearish evening star candlestick formation is a major reversal candlestick pattern. In many cases, only one candle is necessary to put a trader on high alert that a reversal may be happening.
An exponential moving average (EMA) is a moving average for time-series data which places greater weight on more recent data. An exponential moving average places exponentially greater weight on data in a time series as the data becomes more recent.
FactSet is a financial data and software company. FactSet's software platform offers real-time news, quotes and tools that help analysts screen for certain securities and test portfolio models.
The flag formation is a technical analysis pattern that occurs when there is a straight upward move in a stock. The flag formation movement is often nearly vertical, and at the very least is extremely steep.The move is so rapid, in fact, that on a daily chart a trendline can't even be drawn.
The hammer candlestick is a technical indicator that typically appears after a prolonged downtrend.Here is an example of a hammer candlestick: During the period of the hammer candlestick, the stock or index experiences strong selling.
The hangman candlestick has a very long shadow and a very small real body.Typically, it has no upper shadow (or at the very most, an extremely small one).
The head and shoulders pattern consists of four distinct parts: The left shoulder, the head, the right shoulder, and the neckline.Each of these four must be present for the formation to exist.
The high wave candlestick has a very small real body, and it typifies a stock or index plagued by uncertainty. The spinning top has small upper and lower shadows, whereas in the high wave the shadows are longer, revealing more volatility.Here is what the high wave candle looks like: High wave candlesticks portray situations where the market is having difficulty coming to a consensus on a security's value.
The Hindenburg Omen is a technical indictor that attempts to predict market crashes. The Hindenburg Omen is triggered when three complex conditions are met: 1) The number of new daily 52-week highs and lows on the NYSE is more than 2.2% of all securities traded that day.
A key reversal is a one-day trading pattern that may signal the reversal of a trend.Other frequently-used names for key reversal include "one-day reversal" and "reversal day." Depending on which way the stock is trending, a key reversal day occurs when: In an uptrend -- prices hit a new high and then close near the previous day's lows.
Long-legged doji candlesticks are one of four types of dojis -- common, long-legged, dragonfly and gravestone.All dojis are marked by the fact that prices opened and closed at the same level.
A major downtrend, or bear market, is when financial assets and markets -- as with the broader economy -- fall steadily for an extended period of time. A major downtrend is when each successive decline of the primary trend carries the market to lower lows and lower highs, lasting from several months to several years.
A major uptrend, or bull market, is when financial assets and markets -- as with the broader economy -- move in an upward direction for extended periods of time. A major uptrend is when each successive advance of the primary trend peaks and troughs higher than the one preceding it, and can last from several months to several years.
The Market Technicians Association (MTA) is a professional association for technical analysts. The MTA is a nonprofit association that fosters an environment of ethics and professionalism among Chartered Market Technicians (CMTs).
The McClellan Oscillator was first designed by Sherman and Marian McClellan in 1969.It is an excellent tool for determining the overbought or oversold condition of the stock market.
The measuring principle allows traders to set a specific minimum price target when trading a stock.This technique works with any well-defined technical analysis pattern, such as a head and shoulders, rectangle or triangle.
A minor downtrend is a corrective movement in the market -- lasting less than three weeks -- that goes against the direction of a secondary uptrend. The minor trend is the last of the three trend types in Dow Theory -- the other two types are primary and secondary trends.
A minor uptrend is a corrective movement in the market -- lasting less than three weeks – that goes against the direction of a secondary downtrend. The minor trend is the last of the three trend types in Dow Theory -- the other two types are primary and secondary trends.
The moving average is a popular technical indicator which investors use to analyze price trends.It is simply a security's average closing price over the last specified number of days.
Moving Average Convergence Divergence, or MACD (pronounced "Mack-Dee") is a technical analysis indicator developed by famous market technician Gerald Appel. The MACD is used by traders to determine when to buy or sell a security, based on the interaction between a line constructed from two moving averages and a "trigger line." The MACD line is constructed from two moving averages -- a 12-period, or faster moving average, and a 26-period, or slower moving average.The MACD calculation subtracts the 26-period from the 12-period to create a single line.
Negative correlation describes a relationship in which changes in one variable are associated with opposite changes in another variable. For example, many economists have discovered that people tend to buy more candy and liquor during recessions.
A negative directional indicator (known as negative DI) is a technical measure of a downtrend's momentum. Mathematically speaking, a negative directional indicator exists when the difference in a security's low price for two periods is bigger than the difference in the security's high price over the same two periods.
Net present value (NPV) reflects a company’s estimate of the possible profit (or loss) from an investment in a project.Companies must weigh the benefits of adding projects versus the benefits of holding onto capital.
As the name implies, new highs/new lows represents the number of all stocks making new 52-week highs or lows.The result is graphed, and the aggregate number of new highs and new lows is used as a market timing tool.
On Balance Volume (OBV) was designed by Joseph Granville to track the flow of volume in and out of a stock or index.Essentially, OBV is a running total of volume.
A point-and-figure chart is a graph which records discrete price changes without accounting for an associated period of time.They are often used in technical analysis as a means of predicting future price changes.
Price action is a term often used in technical analysis to interpret and describe price movements of securities. Technical trading revolves around chart and pattern analysis, and when patterns change dramatically, technical traders often refer to this as price action. Price action isn't just about the amount of a security's price change; it also describes how prices behave when they reach certain high and low points.For example, an analyst might conclude that the market as a whole is going up when a certain security or index price rises above a 52-week high and then keeps setting new 52-week highs over a period of time.
A price by volume (PBV) chart is a horizontal histogram that shows a cumulative total of how many shares of a stock traded at a given price. Mechanically speaking, a PBV chart is simply price, plotted as a line on the X axis, and volume, plotted on the Y axis as a bar.
In technical analysis, a price channel is an upper limit (called the resistance) and a lower limit (called the support) in which a security's price tends to stay. Price channels can slope up (indicating bullish sentiment) or down (indicating bearish sentiment); they don't have to simply go "sideways." The important geometric characteristic is that the resistance and support lines are parallel, as shown in this price channel for ChevronTexaco (NYSE: CVX): The channel lines themselves are often based on multiday moving averages or logarithmic scales that reflect price movements in percentage terms.
Also called relative strength, price persistence is the tendency of a security's price to stay on trend relative to a market index such as the S&P 500.It is a measure of momentum.
The price rate of change is simply the percentage change in a security's price between two periods. The formula for the price rate of change is: Price Rate of Change = (Price at Time B - Price at Time A) / Price at Time A For example, let's say Company XYZ's share price was $10 yesterday and was $5 a week ago.Using the formula above, we can calculate that the price rate of change is: Price Rate of Change = ($10-$5) / $5 = 100% The price rate of change can be used to measure not just the direction of a trend but the momentum or speed of a stock price trend.
Qualitative analysis is the use of non-quantifiable methods to evaluate investment or business opportunities and make decisions.This is different from quantitative analysis, which relies on a company's income statement, balance sheet and other quantifiable metrics.
Quantitative analysis is the use of math and statistical methods to evaluate investment or business opportunities and make decisions. In portfolio management, quantitative analysis is often used to mathematically determine when to buy or sell securities.
R-squared, usually represented as R2, is a technique that evaluates the statistical relationship between two series of events.It is commonly used to describe the portion of a security's movement in the market relative to the movement of a related index.
Rate of Change (ROC), is the percentage change in price over a specified time frame.It is one of the most basic ways to measure momentum.
A rectangle formation describes a price pattern where supply and demand are in approximate balance for an extended period of time.In such a scenario, the shares tend to move in a narrow range, hitting resistance at the rectangle's top and finding support at its bottom.
Regression is a statistical method used in finance and other fields to make predictions based on observed values.It is a measure of how correlated a group of actual observations are to a model’s predictions.
Also called price persistence, relative strength is the tendency of a security's price to follow the trend of an index like the S&P 500.It is a measure of momentum.
The Relative Strength Index (RSI) was first developed by renowned technical analyst J.Welles Wilder.
The relative strength line compares a stock's price performance against that of the overall market, usually as measured by the S&P 500.However, if the trader desires, the comparison can be made to another stock or index.
Also called systematic risk or non-diversifiable risk, relevant risk is the fluctuation of returns caused by the macroeconomic factors that affect all risky assets. Diversifiable risk is the risk of something going wrong on the company or industry level, such as mismanagement, labor strikes, production of undesirable products, etc.Relevant risk + Diversifiable risk = Total risk Relevant risk is comprised of the “unknown unknowns” that occur as a result of everyday life.
In technical trading analysis, resistance is an upper limit in a price channel in which a security’s price tends to stay. Price channels can slope up (indicating bullish sentiment) or down (indicating bearish sentiment); they don’t have to simply go “sideways.” The important geometric characteristic is that the resistance lines and support lines (the opposite of the resistance) are parallel, as shown in this price channel for ChevronTexaco (CVX).
The RSI indicator mirrors and anticipates price patterns in the underlying stock or index chart.The indicator's designer, Welles Wilder, intended for the RSI Indicator to help traders spot chart formations not obvious on a bar chart.
The "rule of 72" is a method of estimating how long it will take compounding interest to double an investment. The rule of 72 is a method used in finance to quickly estimate the doubling or halving time through compound interest or inflation, respectively.
A runs test is a statistical procedure that can be used to decide if a data set is being generated randomly, or if there is some underlying variable that is driving results. If data points are randomly distributed above and below a regression curve, you should be able to predict the number of patterns (runs) you'd expect to see.
The shooting star candlestick is a chart formation consisting of a candlestick with a small real body, and a large upper shadow.This pattern represents a potential reversal in an uptrend.
Spinning tops have small real bodies, and they portray a stock or index plagued by uncertainty.The spinning top has small upper and lower shadows.
Springs are false breakouts that can trap the unsuspecting trader.Spring patterns quickly reverse, with the stock or index then often testing the opposite end of the trading range.
Springs and upthrusts are false breakouts that can trap the unsuspecting trader.Both patterns quickly reverse, with the stock or index then often testing the opposite end of the trading range.
The stochastics indicator is a momentum indicator that shows the location of the current closing price relative to the high/low range over a set number of periods. The stochastics indicator tries to identify turning points by measuring how fast prices are rising or falling.
Straight line basis refers to a method of calculating the depreciation of an asset. Straight Line Basis calculates depreciation which is an accounting measure of the "loss" of value of an asset over time. In other words, depreciation represents the value an asset losses each time it is used. Depreciation is measured over a period of time -- called the "useful life of the asset." Each asset has an established useful life.
In technical trading analysis, support is a lower limit in a price channel in which a security’s price tends to stay. Price channels can slope up (indicating bullish sentiment) or down (indicating bearish sentiment); they don’t have to simply go “sideways.” The important geometric characteristic is that the resistance lines (which are the opposite of support lines; they are the upper limits of the price channel) and support lines are parallel, as shown in this price channel for ChevronTexaco (CVX).
A support level is the price at which stock buyers jump in to purchase shares, establishing a floor beneath which it's difficult for the price to fall. Support, along with its cousin, resistance, are extremely important concepts in swing trading, and they are predicted by drawing horizontal trendlines on a stock price chart.
A swap spread is the difference between the fixed rate component of a given swap and the yield on a Treasury item or other fixed-income investment with a similar maturity. Companies engage in swaps in order to benefit from an exchange of comparative interest rate advantage.
Swing trading is a short-term strategy used by traders to buy and sell stocks whose technical indicators suggest an upward or downward trend in the near future -- generally one day to two weeks. Swing trading uses technical analysis to determine whether or not particular stocks might go up or down in the very near term.
The symmetrical triangle is one of three important triangle patterns defined in classical technical analysis.The other two triangles are the bullish ascending triangle pattern and the bearish descending triangle pattern.
Technical analysis is a methodology that makes buy and sell decisions using market statistics.It primarily involves studying charts showing the trading history and statistics for whatever security is being analyzed.
A technical rally is a price increase brought on by traders reacting to signals from technical analysis. A technical rally occurs after a security has experienced a substantial price decline and begins to recover its market value.
Trend analysis is a technical analysis of the movement of a stock based on past performance. A trend analysis is a method of analysis that allows traders to predict what will happen with a stock in the future.
The tweezers candlestick pattern is a formation that always involves two candles.At a tweezers top, the high price of two nearby sessions are identical, or very nearly so.
Variability is the degree to which a data series deviates from its mean (or in the accounting world, how much a budgeted value differs from an actual value). For example, let's say Company XYZ stock has the following prices: The average of these prices is $21.33.
Weak longs are investors who buy a stock (known as being "long"), but who will sell it at the first sign of a price decline. Weak longs tend to be traders, not investors.