Elementary - Technical Analysis

Question 1

What is a Resistance Level

Answer 1

In an upward trend - When price moves up, and then pulls back, then the highest price reached is the resistance level. At resistance level you will find the most amount of sellers.

Question 2

What is a Support Level

Answer 2

In an upward trend - The lowest point reached, once price pulled back from a resistance level, becomes a support level. At support level you will find the most amount of buyers.

Question 3

What is a False Breakout

Answer 3

A False breakout is when price breaks through a resistance level, only to return in the opposite direction.

Question 4

What is an Uptrend

Answer 4

Line drawn over the support levels in an uptrend. Ascending Trend Line

Question 5

What is a Downtrend

Answer 5

Line drawn over the resistance levels in a downtrend. Descending Trend Line

Question 6

What is a Sidewaystrend

Answer 6

Lines drawn over the support and resistance lines, the overall trend is horizontal

Question 7

What makes trend lines stronger

Answer 7

More data points - instances where the line is confirmed by price

Question 8

What are trend channels

Answer 8

Channels are the support and resistance lines, both lines drawn in a trend - both support and resistance lines in a uptrend = bullish, both support and resistance lines in a down channel = bearish. Sideway channels is support and resistance running horizontal

Question 9

What is a Spinning Top Candle

Answer 9

Long upper shadow, Long lower shadow, small body. A Spinning Top in an upward trend means there might not be many buyers left, possible reversal. A Spinning Top in a downward trend means there might not be many sellers left and possible reversal

Question 10

What is a Marubozu Candle

Answer 10

The candles does not have any shadows. Only Full Body. If Bullish candle, then buyers in control, if Bearish candle, then sellers are in control.

• If a Bullish Marubozu forms at end of Uptrend - means continuation.
• If a Bullish Marubozu forms at the end of a Downtrend - means a reversal might be coming
• If a Bearish Marubozu forms at the end of a Downtrend - then indicates a continuation
• If a Bearish Marubozu forms at the end of an Uptrend then it indicates a reversal might follow

Question 11

What is a Doji

Answer 11

Doji Candles are Open and close at nearly same level - very small body. Doji indicates indecision.

Question 12

What can Doji Indicate

Answer 12

Doji following a Bullish series of candles can indicate the buyers are exhausted.
Doji following a Bearish series of candles can indicate the sellers are exhausted

Question 13

What are Hammer and Hanging Man candles

Answer 13

Hammer and Hanging man candles - long lower shadows, very short upper shadows and relatively tiny bodies. Hammer forms in a downward trend and Hanging man forms in a upward-trend.
Indicates change in direction - Hammer in a downward trend - bullish reversal pattern, Hanging man in a upward trend is bearish reversal pattern

Question 14

What are inverted Hammer and Shooting Star candles

Answer 14

The inverted hammer and shooting star candles - long upper shadows, relatively tiny bodies and nearly no lower shadows.
Inverted hammer is at the bottom of a downward trend, indicating reversal.
Shooting star is at the top of a upward trend - indicating reversal

Question 15

What is a Bullish Engulfing Pattern

Answer 15

The Bullish Engulfing pattern is a two candlestick reversal pattern that signals a strong up move may be coming.

It happens when a bearish candle is immediately followed by a larger bullish candle.

This second candle “engulfs” the bearish candle. This means buyers are flexing their muscles and that there could be a strong up move after a recent downtrend or a period of consolidation.

Question 16

What is a Bearish Engulfing Pattern

Answer 16

the Bearish Engulfing pattern is the opposite of the bullish pattern.

This type of candlestick pattern occurs when the bullish candle is immediately followed by a bearish candle that completely “engulfs” it.

This means that sellers overpowered the buyers and that a strong move down could happen.

Question 17

What are Tweezer Bottom/Tops

Answer 17

This type of candlestick pattern is usually be spotted after an extended uptrend or downtrend, indicating that a reversal will soon occur.

There are two types of Tweezer patterns: the Tweezer Bottom and the Tweezer Top
The first candlestick is the same as the overall trend. If price is moving up, then the first candle should be bullish.

The second candlestick is opposite the overall trend. If the price is moving up, then the second candle should be bearish.

The shadows of the candlesticks should be of equal length.

Tweezer Tops should have the same highs, while Tweezer Bottoms should have the same lows

Question 18

What is the background to Fibonacci

Answer 18

Leonardo Fibonacci was a famous Italian mathematician

He had an “Aha!” moment when he discovered a simple series of numbers that created ratios describing the natural proportions of things in the universe.

The ratios arise from the following number series: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144…

This series of numbers is derived by starting with 0 followed by 1 and then adding 0 + 1 to get 1, the third number.

Then, adding the second and third numbers (1 + 1) to get 2, the fourth number, and so on.

After the first few numbers in the sequence, if you measure the ratio of any number to the succeeding higher number, you get .618.

For example, 34 divided by 55 equals .618.

If you measure the ratio between alternate numbers you get .382.

For example, 34 divided by 89 = 0.382 .

Question 19

Fibonacci have two levels which are?

Answer 19

Fibonacci Retracement Levels

0.236, 0.382, 0.618, 0.764
Fibonacci Extension Levels

0, 0.382, 0.618, 1.000, 1.382, 1.618