Pillar 2: Technical Analysis

Question 1

Market makers

Answer 1

facilitates liquidity in the market

Question 2

Ask price

Answer 2

price that the market maker is willing to sell stock for

Question 3

Bid price

Answer 3

price that the market maker is willing to buy stock for

Question 4

Spread

Answer 4

difference between ask and bid price

Question 5

Uptrend

Answer 5

stock chart shows higher swing highs

Question 6

Downtrend

Answer 6

stock chart shows lower swing lows

Question 7

Sideways trend

Answer 7

swing highs and swing lows remain at the same level

Question 8

Support

Answer 8

valley

Question 9

Resistance

Answer 9

peak

Question 10

Swing highs

Answer 10

stock price peaks get higher and higher

Question 11

Swing lows

Answer 11

stock price valleys get lower and lower

Question 12

Double top

Answer 12

two peaks are beside each other; signifies that there’s falling support for stock price and can lead to a kiss goodbye

Question 13

Kiss goodbye

Answer 13

support level falls (usu. from a double top) and becomes a new resistance level

Question 14

Head and shoulders

Answer 14

one tall resistance level surrounded by two short resistance levels; alerts us to a coming downward trend

Question 15

Double bottom

Answer 15

two support levels; signifies that there’s falling resistance; predictor of a possible uptrend; wait for confirmation that it will break through the resistance level

Question 16

Inverse head and shoulders

Answer 16

upside-down head and shoulders; a bullish pattern which tells us of a probable downtrend reversal when it breaks above the resistance level

Question 17

Ascending triangle

Answer 17

characterized by a support level and rising resistance/ support levels; put an entry order to buy above the resistance level (p. 342)