Stock Definations Flashcards

Question

Andrew's Pitchfork

Answer 1

Developed by Alan Andrews, this concept that uses three parallel lines drawn from the three points that you select. The points selected to being the pitchfork are usually three consecutive major peaks or troughs. The three parallel lines extending out to the right are used as normal support and resistance points.

Answer 2

The date on which a company first publicly announces an impending stock split.

Answer 3

Popular term for the yearly report made by a company to its stockholders. Federal law requires all registered corporations to make such reports. They usually contain a balance sheet, an income statement, a list of changes in retained earnings, and how income of the corporations was used.

Answer 4

The translation of periods of less than a year into an annual rate for comparative purposes. To annualized quarterly figures, you multiply them by four.

Answer 5

The simultaneous buying and selling of securities to take advantage of price discrepancies. Arbitrage opportunities usually surface after a takeover offer.

Answer 6

A pattern of sideways price movement that follows a stalled uptrend or downtrend of a stock or commodity. Some of these patterns (triangles, flags, wedges etc.) have good predictive value.

Answer 7

On an Arithmetic (Linear) scale chart, the spacing between each point on the vertical scale is identical. Thus the vertical distance between 10 and 20 is the same as vertical distance between 90 and 100.

Answer 8

A market indicator showing the ratio between the average volume of declining stocks and the average volume of advancing stocks. Generally, a rising TRading INdex is bearish and a falling TRIN is bullish.

Answer 9

An indicator system that can be used to determine weather or not a stock is trending and the strength of its trend. The Aroon Oscillator signals an upward trend when it rises above zero and downward trend when it falls below zero. The farther away the oscillator is form the zero line, the stronger the trend.

Answer 10

An ascending line that connects the bottoms of the down waves and is parallel to a trend-line. The ascending channel line and the trend-line form borders on an uptrend.

Answer 11

A sideways price pattern between two converging trend-lines in which the lower line is rising while the upper line is flat. This is generally bullish pattern.

Answer 12

Also known as the "offer", the price that the market maker guarantees to fill a buy order. A buy order palaces at the market will usually be filled at the current asking (offer) price. The ask price is usually greater than the bid price.

Answer 13

Any possessions that have value in an exchange.

Answer 14

An option whose strike price is squeal to the price of the underlying security.

Answer 15

Part of the Directional Movement Indicator system developed by J. Welles Wilder, the ADX line is based on the spread between the +DI and -DI lines from that same system.

Answer 16

An indicator that measures a security's volatility. High ATR values indicate high volatility and may be an indication of panic selling or panic buying. Low ATR reading indicate sideways movement by the stock.

Answer 17

A strategy that is optimized on historical data, then applied to current dataA to see if the results are smililar. Rarely done properly and usually resorts to a form of curve fitting.

Answer 18

A popular way to display and analyze financial price information in graphical form. The horizontal axis of a bar chart represents the passage of time with the most recent time periods on the right side while the vertical axis represents the stock's price.

Answer 19

Weekly index prepared by the publishers of Barron's. Index compares yields of higher grade to lower grade corporate bonds. As yields on lower grade bonds fall, it shows that investors are more confident about the economy. Used for an insight into possible market sentiment about equity securities.

Answer 20

The difference between cash prices and the futures of contract prices

Answer 21

A person who believes prices will decline and might be described as having a "bearish" outlook. Bear markets occur when roughly 80% of all stocks decline for an extended period of time. 1973-74 and 1981-82 have been referred to as bear markets.

Answer 22

A long period of time when prices in the market are generally declining. It is often measured by a percentage decline of more than 20%.

Answer 23

An option strategy with maximum profit when the price of the underlying securities decline. In futures, short the nearby future and long the deferred in anticipation of a decline in the general level of prices.

Answer 24

A situation that occurs when prices break below a significant level and generate a sell signal, but then reverse course and negate the sell signal, thus "trapping" the bears that acted on the signal with losses. A bear trap is another from of whipsaw and relates to the spring.

Answer 25

A situation when price records a higher high and the indicator forms a lower high. The indicator does not confirm the higher high in prices and this foreshadow a reversal. Divergences are most common with momentum oscillators.

Answer 26

A limit order to buy or sell a security for a specific price that is lower than the current market price. If the market does not reach these prices. The order will go unfilled.

Answer 27

A measure of a security's systematic or Market risk. While most stocks move in the same direction as the stock market, the level of the beat indicates the degree of correlation between a security and the market. The market is the benchmark and has the beta of 1.

Answer 28

The price at which the market maker guarantees to fill a sell order. A sell order placed at the market will usually be filled at the current bid price. The big price is usually less than the ask price.

Answer 29

A proprietary computerized trading system whose rules are not disclosed or readily accessible.

Answer 30

A purchase or sale of a large number of shares or dollar value of bonds. Although the term is real active, 10,000 or more shares, or any quantity worth over $200,000 is generally considered a block.

Answer 31

A well known, public company that is thought to be in good financial shape and have sound fundamentals (profitability, earnings). An investment in a blue chip is regarded as a safe investment. Examples include Wal-Mart, Coca-Cola, and General Electric.

Answer 32

Not to be confused with bonds yield, it is the amount an investor pays to buy a bond. Brand prices and interest rates have an inverse relationship: when rates rise, bond prices fall; when rates decline, bond prices rise.

Answer 33

The return an investor would earn if a bond was purchased and held to maturity. Usually, the longer the term of a bond, the higher the interest rate that's paid to the holder, compensating acting for the inflation risk of having money tied up for a long time. To determine the yield, divide the interest rate by the purchase price of the bond.

Answer 34

In Point & Figure charts, it is the price value of one "X" or "O". An X is shown when prices rise by the box size, and an O is shown when princes fall by the box size. Increasing the box size filters smaller price movements.

Answer 35

A comparison of the number of issues traded with the number of issues listed for trading. A measurement of the number of issues advancing versus the number of issues declining on a given days or as a moving average. Many measurements are used: advances divided by declines, as a percentage, advances minus declines as a net positive or negative number. The measurement consistently followed in an insight into investor sentiment and is used extensively by market analysts.

Answer 36

Martin Zweig developed this momentum indicator that illustrates a "thrust" when, during a 10 day period, the average number of issues that are advancing goes from below 40% to above 61.5%. This means the market went from being oversold to one of strength, but is not yet considered overbought.

Answer 37

A price gap that forms on the completion of an important price pattern. A breakaway gap usually signals the beginning of an important price move.

Answer 38

Price of a security emerging from a previous trading pattern. The new price "breaks out" above the high (or below the low) trading pattern lines that enclose all other prices for that security in the preceding period,. Breakouts are used by technical analysts too predict substantial upside or downside movement.

Answer 39

A person who believes prices will advance and might be described as having a "bullish" outlook. Bull markets occur when roughly 80% of all stocks advance over an extended period of time. 1982-87 and 1995-99 have been referred to as bull markets.

Answer 40

The Investor's Intelligence market sentiment indicator which shows the relationship between bullish and bearish advisors. It is interpreted as a contrary indicator, meaning that if it reflects extreme bullishness, the market is probably at a top.

Answer 41

A long period of time when prices in the market are generally increasing.

Answer 42

A situation that occurs when prices break above a significant level and generate a buy signal, but suddenly reverse course and negate the buy signal, thus "trapping" the bulls that acted on the signal with losses. A bull trap is another form of whipsaw and relates to the upthrust.

Answer 43

A situation when price records a lower low and the indicator forms a higher low. The indicator does not confirm the lower low in prices and this could foreshadow a reversal. Divergences are most common with momentum oscillators.

Answer 44

A popular market breadth indicator that is calculated by dividing the number of stocks in a given group (an exchange, an industry, etc.) that are currently trading with Point and Figure buy signals, by the total number of stocks in that group. BPI can be used to determine overbought/ oversold conditions and can generate buy/ sell signals. It is important to note that the Bullish Percent Index is not something that can be applied to a single stock but rather an index that is calculated for a group of stocks.

Answer 45

A reversal char pattern that forms after excessive speculation drives prices up too far, too fast. It is designed to identify speculative advances that are unsustainable for a long period.

Answer 46

A conditional that indicates a good time to buy a stock. The exact cirumstances of the signal will be determined by the indicator that an analyst is using.

Answer 47

A buy order usually placed above the current price, ensuring that a security would have to trade at the set level before the buy order would be activated at 35. By placing a buy stop order just above resistance, a trader can ensure that the security will break resistance before going long. On the other hand, trader looking to catch a bottom or intraday low might place a buy stop below the current price, but near support.

Answer 48

A company's repurchase of its' own shares of stock

Answer 49

A sudden upward movement in the market value of a security characterized by a gap in the prices between one trading sessions and the next. Used by technical analysts and often considered an indication that a security has been overbought and the price will fall.

Answer 50

A risky short-term strategy where a buyer borrows money from a broker to make an investment. The buyer believes the stock price will rise and is trying to maximize profits by investing more money in the stock.

Answer 51

The right to buy a stock or commodity future at a given price before a given date. The owner of the call option is speculations that the price of the stock will go up and is therefore bullish.

Answer 52

A from of Japanese charting that has become popular in the West. A narrow line (shadow) shows the day's price range. A wider body marks the area between the open and the close. If the close is above the open, the body's is white (not filled); if the close is below the open, the body is black (filled).

Answer 53

The profit derived from the selling price exceeding its initial purchase price. A realized capital gain is an investment that has been sold at a profit. An unrealized capital gain is an investment that hasn't been sold yet but would result in a profit if sold. Capital gain is often used to mean realized capital gain.

Answer 54

The Chicago Board Options Exchange (CBOE). The largest options exchange in the US. The CBOE trades options for over 2000 equities, over 20 stock indices and over 100n ETFs.

Answer 55

CBOE Nasdaq Volatility Index represents the implied volatility of hypothetical 30-day option that is at the money, derived from a basket of put and call options.

Answer 56

An oscillator that helps signal if a stock is undergoing accumulation or distribution. It is calculated form the daily reading of the Accumulation Distribution Line. The CMF is unlike a momentum oscillator in that is not influenced by the daily price change. Instead, the indicator focus uses on the location of the close relative to the range for the period (daily or weekly).

Answer 57

This is a moving average of the Accumulation Distribution Line. It was developed by Marc Chaikin. It is created by subtracting a 10 period exponential moving average of the accumulation/ distribution line from a 3 period exponential average of it.

Answer 58

When prices trend between two parallel trend lines, this is referred to as a channel.

Answer 59

A straight line drawn parallel to the basic trend-line. In an uptrend, the channel line slants up to the right and is drawn above rally peaks; in a downtrend, the channel line is drawn below price through and slants down to the right. Prices often meet resistance at rising channel lines and support at falling channel lines.

Answer 60

Raw material such as gold, pork bellies, or orange juice. Traders in commodities buy and sell contracts (also called futures) for such materials.

Answer 61

Developed by Donald Lambert, the CCI is an indicator designed to identify cyclical turns in commodities. It may also be applied to stocks or bonds.

Answer 62

A subsequent signal that validates a position stance. Traders and investors sometimes look for more than one signal or require validation before acting. For example: confirmation of a trend change may entail an advance past the previous reaction high. For an indicator such as MACD, confirmation of a divergence maybe a subsequent moving average crossover.

Answer 63

A form of commission that is a back-end load on mutual funds that decline over time. For instance, if you sell mutual fund shares that have a CDSC after one year, you may owe a 4% charge, but if you hold for three years, the charge may decline to 2%.

Answer 64

A type of chart pattern that occurs in the middle of an existing trend. The previous trend resumes when the pattern is complete. Examples include the Rectangle and Pennant continuation patterns.

Answer 65

A trading or investing style based on sentiment. Contrarians are typically bullish when sentiment is excessively bearish. Constrains are typically bearish when sentiment is excessively bullish. The Put/Call Ratio is sentiment indicator used by contrarians.

Answer 66

After an advance, a decline that does not penetrate the low from which the advancing began in known as a correction. Also referred to as a retracement, a correction usually retraces 1/3 to 2/3 of the previous advance.

Answer 67

An unweighted geometric average of some important commodities. It averages prices across 17 commodities and across time. The index tracks energy, grains, industrial, livestock, precious metals, and agricultures.

Answer 68

A point on a graph where two lines intersect. Depending on which lines they are, a crossover may indicate a buy or sell signal. For example, the prince line crossing above a moving average line may generate a buy signal. Oscillator such as MACD and Chaikin Money Flow experience centerline crossovers.

Answer 69

A running total of values used to form an indicator. On Balance Volume is a running total of volume. Volume is added on up days and subtracted on down days.

Answer 70

A bullish charts pattern that marks a consolidation period followed by a breakout. The "cup" part of the pattern resembles a rounding bottom, and is followed by a "handle" that acts as a final consolidation before a breakout.

Answer 71

A price high or low that repeats itself at the same interval over time. cycle theory asserts that cyclical forces, both long and short, drive price movement in the financial markets.

Answer 72

Shares of companies that are highly sensitive to economic performance. Cyclical stocks tend to perform well when the economy is growing and suffer when the economy contracts. Chemical (Dupont), transportation (FDX Corp), auto(General Motors), paper(International Paper) and steel (Nucor) represent a few cyclical industries.

Answer 73

A bearish reversal pattern that continues the uptrend with a long white body. The next day opens at a new high then closes below the midpoint of the body the first day.

Answer 74

A style of trading where all positions are cleared before the end of the trading day. Contrast this with position trading, where stocks or securities may be held for longer periods.

Answer 75

A signal where the shorter moving average moves below the longer moving average. Usually, this term is associated with eh 50-day moving average crossing below the 200-day moving average.

Answer 76

A market stage of a stock that is characterized by a downtrend with subsequently lower highs and lower lows.

Answer 77

A sideways price pattern between two converging in trend-lines in which the upper trend-line is descending while the lower line is flat. This is generally a bearish pattern.

Answer 78

A price oscillator used to identify cycles in price plot. DPO is based on the difference in price and a displaced moving average.

Answer 79

An indicator that plots a positive +DI line measuring buying pressure and a negative -DI line measuring selling pressure. The DMI pattern is bullish as long at the +DI line is above the -DI line. The average Directional Index line is derived form this system and is based on. The spread between the +DI and -DI lines.

Answer 80

The systematic selling of security without significantly affecting the price. After an advance, a stock may start forming a top and trade sideways for an extended period. While this top forms, a security's shares may experience distribution as well-informed traders or investors seek to unload positions. A quiet distribution period is usually subtle and not enough to put downward pressure on the price. More aggressive distribution will likely put downward pressure on prices.

Answer 81

A situation that occurs when two lines on a chart move in opposite directions vertically. People often look for divergences by comparing a stock's direction to the direction of its RSI, its MACD or its Stochastic Oscillator. There are two kinds of divergences: positive and negative. A positive divergence occurs when the indicator moves higher while the stock is declining. A negative divergence occurs when the indicator moves lower while the stock is rising.

Answer 82

A candlestick with a body so small that the open and close prices are equal. A Doji occurs when the open and close for that day are the same, or very close to being the same.

Answer 83

A bearish Point & Figure chart pattern that forms when an O-Column breaks below the low of the prior O-Column.

Answer 84

A bullish reversal chart pattern that is typically associated with line and bar charters. The pattern forms with two consecutive troughs that are roughly equal, a moderate peak in-between and resistance breakout.

Answer 85

A bullish Point & Figure chart pattern that forms when an X-Column breaks above the high and the prior X-Column.

Answer 86

A bearish reversal chart pattern that is typically associated with line and bar charts. The pattern forms with two prominent peaks that are roughly equal, a moderate trough in-between and a support break.

Answer 87

The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks published by Dow Jones & Co. Because it is price-weighted, stocks with the highest prices will have the most influence and those with he lowest, the least influence.

Answer 88

The Dow Jones Transportation Average consists of 20n stocks in the transportation business. Originally the index only included railroads; now airlines and trucking companies are included. According to the Dow Theory, a new major high in the DJIA should be confirmed by a new major high in this index before it is considered a reliable signal.

Answer 89

The Dow Jones Utilities Average is used as a surrogate for bond prices. The DJUA is often a leading indicator of broad market trends since these stocks are interest-rate sensitive. Utility companies typically have large amounts of debt on which they pay interest and hold cash for capital improvements, so they are affected by interest rate changes sooner than other industries.

Answer 90

One of the oldest and most highly regarded technical theories. A Dow Theory buy signal is given when the Dow Industrial and Dow Transportation averages close above a prior rally peak. A sell signal is given when both averages close below a prior reaction low.

Answer 91

A straight line drawn down and to the right above successive rally peaks. The longer the down trend-line has been in effect and the more times it has been tested, the more significant it becomes. A violation of the down trend-line usually signals a reversal of the downtrend.

Answer 92

A continuation pattern with a long black body followed by another black body that has gapped below the first one. The fire day is white and opens within the body of the second day, then closes in the gap between the first two days, but does not close the gap.

Answer 93

A Doji line where the open and close price are at the high of the day. Like other Doji days, this one normally appears at market turning points.

Answer 94

An approach to market analysis that is based on repetitive wave patterns and the Fibonacci number sequence. An ideal Elliott wave pattern shows a five wave advance followed by a three wave decline.

Answer 95

The energy products listed include crude oil, heating oil, and natural gas.

Answer 96

A reversal pattern that can be bearish or bullish depending upon Whether it is in an uptrend or down trend. The first day is characterized by a small body, followed by a day whose body completely engulfs the previous day's body.

Answer 97

Lines that are placed at fixed percentages above and below a moving average line. Envelopes help determine when a market has traveled too far from its moving average and is overextended.

Answer 98

Collections of stocks that are bought and sold as a package on the exchange, principally the American Stock Exchange, but also the NYSE, CBOE, and Nasdaq.

Answer 99

A three day bearish reversal pattern similar to the Evening Star. The uptrend continues with a large white body. The next day opens higher, trades in a small range, then closes at its open (Doji). The next day closes below the midpoint of the body of the first day.

Answer 100

A bearish reversal pattern that continues an uptrend with a long white body day followed by a gapped up small body day, then a down close with the close below the midpoint of the first day.

Answer 101

The first day of the ex-dividend period. If an investor does not own the stock before the ex-dividend date, they will be ineligible for the dividend payout. The exchanges automatically reduced the price of the stock by the amount of the dividend for all pending transactions that have not been completed by the ex-dividend date.

Answer 102

A price gap that occurs at the end of an important trend, and signals that the trend is concluding.

Answer 103

A moving average that gives greater weight to more recent data in an attempt to reduce the lag of (or "smooth") the moving average.

Answer 104

A term describing a stock that has risen past its pivot point. Such a stock is considered a risky investment because it has already begun its advance and is more likely to reverse.

Answer 105

A bearish continuation pattern. A long black body is followed by three small body days, each fully contained within the range of high and low off the first day. The fifth day closes at a new low.

Answer 106

A bullish pattern that beings wide at the top and contracts as prices move lower toward a resistance breakout.

Answer 107

The Fibonacci number sequence (1,2,3,5,8,13,21,34,55,89,144,...) is constructed by adding the first two numbers to arrive at the third. The ratio of any number to the next number is 61.8%, which is a popular Fibonacci retracement number. The inverse of 61.8% is 38.2%, also used as a Fibonacci retracement number. It is the ratio of the Fibonacci sequence that is important and valuable, not the actual numbers in the sequence.

Answer 108

A continuation chart pattern that generally lasts less than three weeks and resembles a parallelogram that slopes against the prevailing trend. The flag represents a minor pause in a dynamic price trend.

Answer 109

A market analyst that relies on economic supply and demand information as opposed to focusing on charts and market indicators for a technical analysis.

Answer 110

Futures contracts are forward contracts, meaning they represent a pledge to make a certain transaction at a future date. These exchange-traded contracts require the delivery of commodity, bond, currency, or stock index, at a specified price, on a specified future date.

Answer 111

Gaps form when opening price movements create a blank spot on the chart. This occurs when the high of the day is below the low of the previous day or when the low of the day is above the high of the previous day. Gaps are especially significant when accompanied by and increase in volume.

Answer 112

Breakaway gaps signal a potential change in trend and are especially significant when accompanied by an increase in volume. A bullish breakaway gap forms when a security gaps up after an extended decline. Bullish breakaway gaps can also occur after an extended base and consolidation period. A bearish breakaway gap forms when a security's gaps down after an extended advance. Bearish breakaway gaps can also from after an extended top or consolidation period.

Answer 113

Common gaps occur within a trading range or shortly after a sharp move as a reaction. These gaps do not signify the beginning or continuation of a move, but rather represent anomalies. For instance, if a security has a declined 20% in a week and gaps up, it would be considered a common gap and not likely to signify a change in trend. Or, if a trading range developed between 20 and 30, and a gap forms in the middle, it is probably a common gap.

Answer 114

A continuation gap forms in the middle of a move and in the same direction as the current move. These gaps signal a continuation of the preceding trend and can mark good entry points. After a short and intermediate advance, a continuation up gap is usually considered bullish and signals a renewal of the uptrend. After a short intermediate decline, a continuation down dap is usually considered bearish and signals a renewal of the downtrend. This gap is all called a measuring or runaway gap.

Answer 115

After an extended or long move, a gap in the direction of the current move is called an exhaustion gap. For an exhaustion gap to be considered valid, prices should reverse soon after the gap and close the gap. After an extended decline, a gap down could signal that the downtrend is about to exhaust itself. An exhaustion gap is confirmed when prices reverse soon afterwards and move above (or "close") the gap. After an extended advance, an exhaustion gap would be confirmed when prices reverse soon afterwards and move below the gap.

Answer 116

An up gap forms when a security opens above the previous period's high, remains above the previous high for the entries period and closes above it. Up gaps can form on daily, weekly or monthly charts and are generally considered bullish. A down gap forms when a security opens below the previous period's low, remains below the previous low for the entire period and closes below it. Down gaps can from on daily, weekly, or monthly charts and are generally considered bearish.

Answer 117

A signal where the shorter moving averages moves above the longer moving averages. Usually, this term is associated with he 50-day moving average crossing above the 200-day moving average.

Answer 118

Also call Phi, the Golden Ratio is 1.618. The inverse of 1.618 is .618. These ratios can be found throughout nature, architecture, art, and biology.

Answer 119

A Doji Line developed when the Doji is at, or very near, the low of the day.

Answer 120

Hammer candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during an advance, then it is called a Hanging Man.

Answer 121

Hanging Man candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlesticks looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer.

Answer 122

A two day pattern that has a small body day completely contained within the range of the previous body, and is the opposite color.

Answer 123

A two day pattern similar to the Harami. The difference is that the last day is a Doji.

Answer 124

A bullish reversal pattern marked by three (or more) prominent troughs with a middle trough (the head) that is lower than the other troughs (the shoulders). When the trend line (neckline) connecting the peaks at the top of the pattern is broken, the pattern is complete.

Answer 125

A bearish reversal pattern marked by three (or more) prominent peaks with a middle peak (the head) that is higher than the other peaks (the shoulders). When the trend line (neckline) connecting the troughs at the bottom of the pattern is broken, the pattern is complete.

Answer 126

This situation occurs when the indicator forms a higher high and the security forms lower high. Relative to the indicator, the security shows weakness that could be bearish. It is a backward bearish divergence.

Answer 127

This situation occurs when the indicator forms a lower low and the security forms higher low. Relative to the indicator, the security shows strength that could be bullish. It is a backward bullish divergence.

Answer 128

A breadth indicator based on the number of stocks recording new 52-week highs and new 52-week lows. High-Low Index = (New Highs / (New Highs - New Lows))\*100.

Answer 129

Created by James Miekka, the Hindenburg Omen warns of potential weakness in the stock market. There're are three criteria to activate the omen. First, NYSE new highs and new lows must both be more than 2.8% of advances plus declines. Second, the NY Compoiste is above the level it was 50 days ago. Third, the number of new highs cannot be more than double the number of new lows. The activation period is good for 30 days. Once active, a sell signal is triggered when the McClellan Oscillator moves below zero and negated when the McCellan Oscillator moves back above zero.

Answer 130

These are HOLding Company Depository Receipts. Launched by Merrill Lynch, HOLDRs trade just like rocks on the American Stock Exchange. Each HOLDR is a basket of stocks designed to track the performance of a particular industry segment. For example, the Reginal Bank HOLDRs (RKH) consist of stock from about 20 regional banks.

Answer 131

A price overlay consisting of a straight, horizontal line on the chart at a specified price level. Note that you can add multiple horizontals lines to a SharpChart by enter several price levels separated by commas.

Answer 132

A value, usually derived from a stock's price or volume, that an investor can use to try to anticipate future price movements. Indicators are divided into two groups: trend following or lagging and momentum or leading. Lagging indicators tell you what prices are doing now, or in the recent past, so they are useful when stocks are trending. A moving average is an example of a lagging indicator. Leading indicators are designed to anticipate future price action and many come in the form of oscillators. RSI is an example of momentum indicator.

Answer 133

The industrial metals listed include aluminum, copper, and zinc.

Answer 134

A grouping of companies in the same line of business. Industry groupings are more specific to the business than sector groupings. For example, the transportation sector includes airfreight, airline, trucking, railroad, and shipping industry groups.

Answer 135

The first offering of common stock to the public.

Answer 136

An additional aspect of market analysis that takes into consideration the price action of related market sectors. The four sectors are currencies, commodities,bonds, and stocks. International markets are also included. This approach is based on the premise that all markets are interrelated and impact on one another.

Answer 137

Equity securities that are designed to track the stock market performance of a specific country. In particular, they are designed to emulate the performance of a specific Morgan Stanley Capital International (MSCI) index. The MSCI indices are not actively managed county funds, but rather baskets of stocks intended to correspond with the general performance of a country's stock market. For example, the Hong Kong WEB (EWH) is designed to correspond to the performance of the Hang Seng Index.

Answer 138

A one day bullish reversal pattern. Ina downtrend, the open is lower, then it trades higher, but close near its open, therefore looking like an inverted lollipop.

Answer 139

Developed by Barclays Global Investors, iShares are index funds that trade like stocks. These shares can be bought or sold like normal stocks and are designed to track:

Answer 140

Wall Street slang for high-yield or non-investment grade bonds, described as such because these securities carry a high default risk than investment-grade bonds with higher ratings. Junk bonds are rated 'Ba' or lower bay Moody's or 'BB' or lower by Standard & Poors.

Answer 141

A one day chart pattern where prices sharply reverse during a trend. In an uptrend, prices open in new highs and then close below the previous day's closing price. In a downtrend, prices open lower and then close higher. The wider the price range on the key reversal day and the heavier the volume, the greater the odds that a reversal is taking place.

Answer 142

An industry or company that is under performing the market.

Answer 143

An industry or company that is outperforming the market.

Answer 144

An order to buy or sell a security at a specific price. As opposed to a market order, limit orders might not be filled immediate if the market moves away from a specific price.

Answer 145

Price charts that connect the closing prices of a given market over a span of time that form a curving line on the chart. This type of chart is most useful with overlay or comparison charts that are commonly employed in intermarket analysis. It is also used for visual trend analysis of open end mutual funds.

Answer 146

The least-squares line-of-best-fit for a price series. Even though the formula is quite complicated, a linear regression is relatively easy to understand. Imagine a scatter plot (dots) for the closing prices of a security. A linear regression is a line that passes through these points with the best possible fit.

Answer 147

On a linear (arithmetic) scale chart, the spacing between each point on the vertical scale is identical. Thus the vertical distance between 10 and 20 is the same as the vertical distance between 90 and 100. While this kind of scaling is intuitive and easy to recreate by hand, linear scaling should not be used on charts with large vertical ranges. A move from 10 to 20 is much better than a move from 90 to 100, but on a linear scale they both appear the same.

Answer 148

The ease with which a stock may bought or sold in volume on the marketplace without causing dramatic price fluctuations. A highly liquid stock is characterized by a large volume of trading and as large pool of interested buyers and sellers.

Answer 149

Cattle and hogs are the livestock included.

Answer 150

On a logarithmic scale chart, the vertical spacing between two points corresponds to the percentage change between those numbers. Thus, on a log scale chart, the vertical distance between 10 and 20 (a 100% increase) is the same as the vertical distance between 50 and 100. Because these charts show percentage relationships, logarithmic scaling is also called "percentage" scaling. It is also called "semi-log" scaling because only one of the axes (the vertical one) is scaled logarithmically.

Answer 151

This candlestick has long upper and lower shadows with the Doji in the middle of the day's trading range, clearly reflecting the indecision of traders.

Answer 152

A situation on a Point and Figure Chart that occurs when a down column that falls 3 boxes or more reverses to an up column. The reversal retraces more than 50% of a down move that has an odd number of "O's", or retraces more than 62.5% of a down move that has an even number of "O's". Because it is not an actual P&F buy signal but offers a good probability of leading to one, this formation is considered a "buy alert".

Answer 153

An indicator developed by Gerald Appel that is calculated by subtracting the 26-period exponential moving average of a given security from its 12-period exponential moving average. By comparing moving averages, MACD displays trend following characteristics, and by plotting the difference of the moving averages as an oscillator, MACD displays momentum characteristics.

Answer 154

A visual representation of the difference between the MACD line and the MACD signal line. The plot of this difference is presented as a histogram, making the centerline crossovers and divergences easily identifiable.

Answer 155

Also known as market cap, it is the total market value of a company (number of shares outstanding multiplied by the price of the stock). A company with 1 million shares outstanding and a stock price of $10 would have a market capitalization of $10 million.

Answer 156

An order to buy or sell a security at the prevailing market price. Sometimes referred to as "at the market", these orders are usually filled immediately by the market maker. A sell order placed at the market will most likely be filled at the big price and a buy order will be filed at the ask price.

Answer 157

A candlestick with no shadow extending from the body sat either the open, the close or at both. The name means close-cropped or close-cut in Japanese, through other interpretations refer to it as Bald or Shaven Head.

Answer 158

A breadth indicator derived from each day's net advances (the number of advancing issues less the number of declining issues). Similar to MACD, the McClellan Oscillator is a momentum indicator that is applied to the advance/decline statistics. As a momentum indicator, the McClellan Oscillator attempts to anticipate positive and negative changes in the AD statistics for market timing. Buy and sell signals are generated as well as overbought and oversold readings. Traders may also look for positive or negative divergences to time their trades.

Answer 159

A popular market breadth indicator that is ultimately derived from the number of advancing and declining stocks in a given market. Many people regard it as an excellent indicator of the overall "health" of the market and the market's current trend. It was developed by Sherman and Marian McClellan and first presented in their book "Patterns for Profit," available from McClellan Financial Publications.

Answer 160

A leading indicator measuring a security's rate-of-change. The ongoing plot forms of oscillator that moves above and below 100. Bullish and bearish interpretations are found by looking for divergences, centerline crossovers and extreme readings.

Answer 161

A volume-weighted momentum indicator that measures the strength of money flowing in and out of a security. It compares "positive money flow" to "negative money flow" to create an indicator that can be compared to price in order to identify the strength or weakness of a trend. The MFI is measured on a 0 - 100 scale and is often calculated using at 14 day period.

Answer 162

A three day bullish reversal pattern that is very similar to the Morning Star. The first day is in a downtrend with a long black body. The next days opens lower with a Doji that has a small trading range. The last day closes above the midpoint of the first day.

Answer 163

A three day bullish reversal pattern consisting of three candlesticks- a long-bodied black candle extending the current down trend, a short middle candle that gapped down on the open, and a long-bodied white candle that gapped up on the open and closed above the midpoint of the body of the first day.

Answer 164

An average of data for a certain number of time periods. It "moves" because for each calculation, we use the latest x number of time periods' data. By definition, a moving average lags of market. An exponentially smoothed moving average (EMA) gives greater weight to more recent data, in an attempt to reduce the lag.

Answer 165

Multicollinearity is a statistical term for a problem that is common in technical analysis. That is, when one unknowingly uses the same type of information more than once, One needs to be careful and not utilize technical indicators that reveal the same type of information.

Answer 166

This tracks the 100 largest stocks listed by Nasdaq Composite Index. It is the most widely traded Exchange Traded Fund (ETF) in the world, with 91 million shares moving each day. The NASDAQ 100 is often treated as an index of "tech stocks" simply because it's components are mostly new technology companies.

Answer 167

This is a market capitalization-weighted index of over 5000 stocks. Because it is weighted by market capitalization, large companies such as Microsoft, Intel, WorldCom, Sun Microsystems, Dell Computer and Oracle dominate the index. With such large portion of the index dominated by technology stocks, the NASDAQ Composite is more a barometer for the technology sector than the broader market. The name "NASDAQ" is derived from the National Association of Securities Dealers Automated Quotation (System).

Answer 168

When the ADX indicator is selected, SharpCharts plots the Positive Directional Indicator (+DI), Negative Directional Indicator (-DI) and Average Directional Index (ADX). With the black, green and red color scheme on SharpCharts, -DI is the red line that measures the force of the down moves over a set period. The default setting is 14 periods.

Answer 169

Developed by Andrew Caldwell, a negative reversal occurs when RSI forms a higher high and the security forms a lower high. It is a backward bearish divergence.

Answer 170

The dollar value of a single mutual fund share, based on the value of the underlying assets of the fund minus its liabilities, divided by the number of shares outstanding. Calculated at the end of each business day.

Answer 171

Market breadth indicators that can be used to identity strength or weakness behind market moves. Net new highs are found by subtracting the number of new lows from the number of the new highs and are usually calculated for the NYSE, Nasdaq and Amex.

Answer 172

New highs refers to the number of stocks recording their highest price level in 52-weeks. New lows are the number of stocks recording their lowest price level in 52-weeks. Lists of stocks making new highs and new lows are available fro the NYSE, Nasdaq and Amex. As an indicator, new highs and new lows are usually shown as moving averages to smooth the results and are often plotted together for easy comparison.

Answer 173

This is an index that measures the market value of all common stocks listed on the NYSE adjusted to account for capitalization changes, new stocks added to the list, and stocks removed from the slit. Over 200 years old, the New York Stock Exchange is one of the oldest continuously operating exchanged in the world. It is associated with large-cap, blue chip stocks and is often used as a surrogate for the market as a whole.

Answer 174

One of the first and most popular indicators to measure positive and negative volume flow, the OBV was introduced by Joe Granville in 1963. The concept behind the indicator is that volume precedes price. OBV is a simple indicator that adds a period's volume when the close is up and subtracts the period's volume when the close is down. A cumulative total of the volume additions and subtract ions forms the OBV line. This line can then be compared with the price chart of the underlying security to look for divergences or confirmation.

Answer 175

The number of options or futures contracts that are still unliquidated at the end of the trading day. A rise or fall in open interest shows that money is flowing into or out of futures contract or option, respectively. In futures markets, rising open interest is considered good for the current trend. Open interest also measures liquidity.

Answer 176

An indicator that determines when a. Market is overbought or oversold condition. When the oscillator reaches an upper extreme, the market is overbought. When the oscillator line reaches a lower extreme, the market is oversold.

Answer 177

A securities market that is not geographically centralized like the trading floor of the NYSE. OTC securities are traded through a telephone and computer network.

Answer 178

A technical condition that occurs when prices are considered too high and susceptible to a decline. Overbought conditions can be classified by analyzing the chart pattern or with indicators such as the Stochastic Oscillator and Relative Strength Index (RSI). A sharp advance from $15 to $30 in 2 weeks might lead a technical to believe that a security is overbought. Or, a security is sometimes considered overbought when the Stochastic Oscillator exceeds 80 and when the Relative Strength Index (RSI) exceeds 70. It is important to keep in mind that overbought is not necessarily the same of being bearish. It merely infers that the stock has risen too far too fast and might be due for a pullback.

Answer 179

A technical condition that occurs when prices are considered too low and ripe for a rally. Oversold conditions can be classified by analyzing the chart pattern or with indicators such as the Stochastic Oscillator and Relative Strength Index (RSI). A sharp decline from 30 to 15 in 2 weeks might lead a technician to believe that a security is oversold. Or, a security is sometimes considered oversold when the Stochastic Oscillator is less than 20 and when the Relative Strength Index (RSI) is less than 30. It is important to keep in mind that oversold is not necessarily the same as being bullish. It merely infers that the security has fallen too far too far and may be due for a reaction rally.

Answer 180

The high is above the previous day's high and the low is below the previous day's low.

Answer 181

A hypothetical trade that does not involve any monetary transactions. Paper trading is a risk-free way to learn the ropes of the market.

Answer 182

An indicator that sets trailing price stops for long or short positions. Also referred to as the "stop-and-reversal indicator", Parabolic SAR is more popular for setting stops than for establishing direction or trend. If the trend is up, buy when the indicator moves below the price. If the trend is down, sell when the indicator moves above the price.

Answer 183

A continuation chart pattern that is similar to the flag, except that it is more horizontal and resembles a small symmetrical triangle. Like the flag, the pennant usually lasts from one to three weeks and is typically followed by a resumption of the prior trend.

Answer 184

A stock that usually sells for less than $1 per share, though the price may rise because significant promotion. Penny stocks are very speculative and risky due to their lack of available information and poor liquidity.

Answer 185

A measure of stock market bullish sentiment that is published weekly by Investor's Intelligence. When only 35% of professionals are bullish, the market is considered oversold. A reading of 55% is considered to be overbought.

Answer 186

An indicator based on the difference between two moving averages expressed as a percentage. The PPO is found by subtracting the longer moving average from the shorter moving average and then driving the difference by the longer moving average.

Answer 187

The percentage difference between two moving averages of volume expressed as a percentage. The PVO is found by subtracting the long volume moving average from the shorter volume moving average and then dividing the difference by the longer moving average.

Answer 188

A bullish two day reversal pattern. The first day, in a downtrend, is a long black day. The next day opens at a new low, then closes above the midpoint of the body of the first day.

Answer 189

The Philadelphia Stock Exchange. Even the PHLX was take over by the Nasdaq, the Nasdaq website still shows a separate listing for the PHLX with over 2600 index, equity and sector-index options traded every day. The Nasdaq also provides statistics such as the PHLX Put/Call Ratio ($XPC).

Answer 190

The point at which resistance disintergrates and the stock price beings to rise past the prior resistance level. This point can be considered the optimal time to buy as the bulls are gaining strength.

Answer 191

A type of chart consisting of columns of X's (showing price rises) and O's (showing price falls) arranged on a square grid. When the index increases, a rising column of black X's is created - a rally. When the index falls, a descending column of red O's appears - a decline.

Answer 192

P&F Buy and Sell signals are very simple patterns that should be confined before placing a trade. The P&F Buy signal is used when calculating the various Bullish Percent indices. When the last signal on the chart was a buy signal, that is, the last breakout was a column of X's going higher than the previous column of X's and no sell signal (no column of Os breaking below the previous column of Os) has happened since the buy signal.

Answer 193

The price that a stock should reach based on recent P&F chart signals.

Answer 194

P&F Buy and Sell signals are very simple patterns that should be confirmed before placing a trade. The P&F Buy signal is used when calculating the various bullish Percent indices. When the last signal on the chart was a sell signal, that is, the last breakout was a column of Os going lower than the previous column of Os and no buy signal (no column of X's breaking above the previous column of X's) has happened since the sell signal.

Answer 195

A style of trading characterized by holding open positions for an extended period of time. Contrast this with day trading, where a trader buys, then sells out of a position before the market closes that day.

Answer 196

When the ADX Indicator is selected, SharpCharts plots the Positive Directional Indicator (+DI), Negative Directional Indicator (-DI): and Average Direction Index (ADX). With the black, green and red color scheme on SharpCharts, +DI is the green line that measures the force of the up moves. The default setting is 14 periods.

Answer 197

Developed by Andrew Cardwell, a positive reversal occurs when RSI forms a lower low and the security forms a higher low. It is a backward bullish divergence.

Answer 198

Gold, platinum, and silver are the listed metals.

Answer 199

A four year cycle that shows the last two years of a President's term outperform the first two years.

Answer 200

A horizontal histogram that overlays a price chart. The histogram bars stretch from left to right starting at the left side of the chart. The length of each bar is determined by the cumulative total of all volume bars for the periods during which the closing price fell within the vertical range of the histogram bar.

Answer 201

Similar to Bollinger Bands, price channels form boundaries above and below the price line and can be used as indicator of volatility. Price channels are created by specifying a number of periods that will chart and n-period high or low around the price line.

Answer 202

A proprietary indicator created by Carl Swenson and featured on his website, DecisionPoint.com This page has more information on the PMO.

Answer 203

Very simple calculations based on standard Point & Figure chart patterns. They are of questionable value but we include them on our charts because they have been used for such a long time.

Answer 204

An indicator based on the difference between two moving averages that is expressed as either a percentage or in absolute terms. The abbreviation PPO refers to the Percentage Price Oscillator, and APO refers to the Absolute Price Oscillator.

Answer 205

Patterns that appear on price charts possessing predictive values. Patterns are divided into reversal and continuation patterns.

Answer 206

The P/E ratio is figured by dividing the price of a stock by the company earning per share. For example, a stock selling at $50, with earning at $5 per share for the previous year, has a P/E ratio of 10 (50/5=10). This value is also called multiple.

Answer 207

An indicator that compares the performance of one security against that of another by plotting the two as a ratio. For example, Google can be computer to the S&P 500 with a ratio of the prices (Google/S&P 500). Google is outperforming when the ratio rises and underperforming when the ratio falls.

Answer 208

A security or index whose correlation with another security or index is so strong that it is used as a substitute for the other. For example, General Electric has a very high correlation to performance of the S&P 500. As GE goes, so does the S&P 500. Therefore, GE can be used as a proxy for the S&P 500.

Answer 209

The right to sell a stock or commodity future at a given price before a given date. The owner of put option is speculating that the price of the stock will go down and is therefore bearish.

Answer 210

Based on CBOE statistics, the Put/Call Ratio equals the total number of puts divided by the total number of calls. When more puts are traded than calls, the ratio will exceed 1. As an indicator, the Put/Call Ratio is used to measure market sentiment. When the ratio gets too low, it indicates that call volume is high relative to put volume and the market may be overly bullish or complacent. When the ratio gets too high, it indicates that put volume is high relative to all volume and the market may be overly bearish or in a panic.

Answer 211

Five lines that divide a specified vertical range into four equally sized horizontal bands.

Answer 212

The measure of diversification that determines how closely a particular fund's performance parallels an appropriate market benchmark over a period. The market is understood to have an R Squared of 100%. Therefore, a fund with an R Squared of 95% contains 95% of the market's diversification and risk. The remaining 5% is unique to the fund manger's actions.

Answer 213

The distance between the high price and the low price for a given time period. For example, the daily range is squeal to the day's high minus the same day's low.

Answer 214

A momentum oscillator that measures the percent change in price from one period to the next. The plot forms an oscillator that fluctuates above and below the zero line as the rate-of-change moves from positive to negative. The oscillator can be used as any other momentum oscillator by looking for higher lows, lower highs, positive and negative divergences, and crosses above and below zero for signals.

Answer 215

The use of a ratio to compare the relative strength between any two entities. For example, an individual stock divided by the S&P 500 index can determine whether that stock is outperforming or underperforming the stock market as a whole. A rising ratio indicates that the numerator in the ratio is outperforming the denominator. Trend analysis can be applied to the ratio line itself to determine important turning points.

Answer 216

An intermittent peak that forms as a security fluctuates. Whether a security is treading up, trending down or moving sideways, intermittent peaks and troughs form due to changes in supply and demand. Defining reactions highs usually depends on the minimum criteria set for time intervals and price movements.

Answer 217

An intermittent trough that forms as a security fluctuates. Whether a security is trending up, trending down or moving sideways, intermittent peaks and troughs form due to changes in the supply and demand. Defending reactions lows usually depends on the minimum criteria set for time intervals and price movements.

Answer 218

After a decline, an advance that does not surpass the high from which the decline began is known as a reaction rally. A reaction rally, also referred to as a retracement, typically retraces from 1/3 to 2/3 of the previous decline.

Answer 219

A breadth indicator that is the 10-day SMA of the High-Low index.

Answer 220

A continuation chart pattern where prices move sideways between two different levels for a period of time and then continue moving in the direction of the previous trend.

Answer 221

A popular oscillator developed by Welles Wilder, Jr. and described in his self-published 1978 book "New Concepts in Technical Trading Systems". RSI is plotted on a vertical scale from 0 to 100. Values above 70 are considered overbought and values below 30, oversold. When prices are over 70 or below 30 and diverge from price action, a warning is given of a possible trend reversal.

Answer 222

Resistance is a price level at which there is a large enough supply of a stock available to course a halt in an upward trend and turn the trend down. Resistance levels indicate the price at which most investors feel that prices will move lower.

Answer 223

A decline that retraces a portion of a previous advance, or an advance that retraces a portion of a previous decline. Retracements typically cover 1/3 to 2/3 of the previous move, and retracement of more than 2/3 typically signals a trend reversal.

Answer 224

In Point & Figure chars, the reversal amount is the number of boxes required to be retraced to cause a reversal, and thus, a move to the next column and opposite direction. When a smaller reversal amount is set for the same data, reversals will be more frequent, and longer-term price trends will be more difficult to identify. Increasing the reversal amount removes columns corresponding to less significant trends.

Answer 225

A chart pattern that occurs before an existing trend reverses direction. For example, a Head and Shoulders reversal pattern marks a change in trend. A break below neckline support indicates that the H&S pattern is complete and the prior uptrend has reversed.

Answer 226

Market turns that happen very quickly with little or not transition period. Spikes often occur when a market has become very overextended in one direction, when a sudden piece of adverse news causes a sudden reversal. Reversal spike highs (as a blowoffs) and lows (ask selling climaxes) can signal a reversal or deceleration of a trend, but unfortunately they are very difficult to forecast.

Answer 227

A stock split which reduces the number of outstanding shares and increases the per share price proportionately.

Answer 228

A calculation equal to the potential reward divided by the potential risk of a position. A long position entered at 100 with potential reward estimated at 120 and potential risk of 90 would have a reward-to-risk ratio of 20:10, or 2 to 1. Generally, a higher reward-to-risk ratio is more appealing trade. For a long position, potential reward might be based on breakout projections, resistance levels or retracement estimates. Potential risk might be basked on support levels, stop or loss requirements.

Answer 229

A bullish continuation pattern. A long white body is followed by three small body days, each fully contained within the range of the high and low of the first day. The fifth day closes at a new high.

Answer 230

A bearish pattern that begins wide at the bottom and contracts as prices move higher toward a support break.

Answer 231

Alison known as a saucer bottom, it is reversal chart pattern representing a long consolidation period that turns from a bearish bias to a bullish bias.

Answer 232

A price gap that usually occurs around the middle point of an important market trend. For what reason, it is also called a measuring or continuation gap.

Answer 233

This tracks 2000 smaller companies.

Answer 234

The S&P 100 Index is a market-capitalization weighted index consisting of 100 large blue chips stocks across various industries. Many fund managers use this index as a benchmark to measure the performance of large cap stocks overall. The market capitalization of the companies in the S&P 100 varies considerably, but in general large companies have a market cap greater than $5 billion dollars.

Answer 235

The Standard and Poors (S&P) Large Cap 500 Index ($SPX) lists the 500 largest "large-cap" stocks (stocks from major companies in various industries). In 1999, companies in the Index ranged from $500 million to $400 billion in market capitalization.

Answer 236

The Standard and Poors (S&P) Mid Cap 400 Index ($MID) lists 400 mid-size companies in various industries. According to S&P, it is a market-value weighted index. In 1999, the companies listed in the S&P 400 ranged from around $200 million to $10 billion in market capitalization.

Answer 237

The Standard and Poors (S&P) Small Cap 600 Index ($SML) lists 600 small-cap stocks, chosen for market size, liquidity, and to represent various industry groups. In 1999, the companies listed in the S&P 600 ranged from $40 million to $2 billion in market capitalization.

Answer 238

A list of stocks, sorted and filtered according to criteria that vary with the scan. Fro example, Stockcharts.com currently publishes scans such as.

Answer 239

A group of companies that generate revenue in similar ways, and tend to rise and fall with the economic cycle. Sectors are commonly broken down into smaller groups called industries. The sectors tracked by the Standard and Poors Index are Basic Industries, Financial, Technology, Industrials, Energy, Consumer Staples, Consumer Services, Utilities, and Transport/Cyclicals.

Answer 240

A federal agency created to regulate and monitor the securities industry. All U.S. companies with stock must abide by the SEC rules and regulations and are required to file quarterly status reports.

Answer 241

A condition that indicates a good time to sell as stock. The exact circumstances of the Signal will be determined by the indicator that an analyst is using. For example, it's often considered a sell signals when the RSI crosses down through the 50 level.

Answer 242

Psychological indicators that attempt to measure the degree of bullishness or bearishness in a market. These are contrary indicators and are used in much the same fashion os overbought or oversold oscillators. Their greatest value is when they reach upper or lower extremes.

Answer 243

A situation where many scared investors exit their positions due to unfavorable news or uncertainty regarding the stock or industry. The dot-com bust was characterized by numerous shakeouts causing many to abandon their dot-com positions, often at great losses.

Answer 244

A single day pattern that can appear in an uptrend. It opens hire, trades much higher, then closes near its open. It looks like the Inverted Hammer except that is is bearish.

Answer 245

The process of selling a stock with he hope of buying it back at a lower price (sell high, buy low). Short sellers are bearish and believe the price will decline. Short selling involves borrowing stock (usually from the broker) to sell short and using margin to finance the borrowing. If the price of the stock is question advances too far, the short seller will receive a margin call and be required to put up more money. A short squeeze occurs when the price advances so fast that short sellers are forced to cover their positions (buy the stock back), which drives the prices even higher.

Answer 246

Also known as a "trigger line", it is a moving average of another indicator that is used to generate simple buy and sell signals. Probably the most used signal line is the one that is built into the MACD Indicator display. The signal line is the exponential moving average of the MACD line. A buy signal is generated when the MACD line crosses above the signal line and a sell signal is generated when the MACD line crosses below the signal line.

Answer 247

A moving average that gives equal weight to each day's price data.

Answer 248

A bullish cycle that extend from November to April and a bearish cycle that extend from May to October. Yale Herschel, founder of the Stock Trader's Almanac, discovered the six month cycle in 1986.

Answer 249

The number of shares immediately available to buy (bid) or sell (ask). A big of $54 with a size of 500 would indicate an order to buy 500 shares at $54. An ask of $55 with a size of 1000 would indicate an order to sell 1000 shares at $55.

Answer 250

The rive-over-run of an invisible line that is the "best fit" line through the previous n data points.

Answer 251

Referred to as "spider", it stand for Standard & Poor's Depositary Receipt. SPDRs have three letter symbols (e.g. SPY) and trade just like stocks on the AMEX. TRhey offer a convenient means to buy and sell the S&P 500, S&P 400 and select S&P sectors.

Answer 252

Candlestick lines that have small bodies with upper and lower shadows and exceed the length of the body. Spinning tops signal indecision.

Answer 253

The division of a stock into multiple shares. In a 2-for-1 split, the stockholder's shares will double in quantity, though the value of each stock will be halved. A stock split is usually an attempt to make high stock prices seem more attractive to investors and generally occurs in the face of new highs.

Answer 254

The difference between the bid and the ask. Generally speaking, more liquid (heavy volume) stocks usually have smaller bid/ask spreads. Less liquid stocks (light volume) usually have larger spreads. See related: big, ask, and size.

Answer 255

A situation that occurs when prices break below support, but soon reverse course and move back above support. prices are said to "spring" back from their support and break and indicate that the bulls are still alive. A spring can also be referred to as a failed (bearish) signal and is considered bullish. Generally, the reversal should occur within 1-3 days of the support break for the failed signal to be considered valid. This is the opposite of an upthrust.

Answer 256

A statistical term that provides a good indication of volatility. It measures how widely values (closing prices for instance) are dispersed form the average. The larger the difference between the closing prices and the average price, the higher the standard deviation will be and the higher the volatility. The closer the closing prices are to the average price, the lower the standard deviation and the lower the volatility.

Answer 257

A momentum indicator developed by George Lane that measures the price of the security relative to the high/low range over a set period of time. The indicator oscillates between 0 and 100, with reading below 20 considered oversold and reading above 80 considered overbought. A 14-period Stochastic Oscillator reading of 30 would indicate that the current price was 30% above the lowest low of the last 14 days and 70% below the highest high. The stochastic Oscillator can be used like any other oscillator by looking for overbought/oversold reading, positive/negative divergences and centerline crossovers.

Answer 258

An oscillator used to identify overbought and oversold readings in RSI. Because RSI can go for extended periods without becoming overbought (above 70) or oversold (below 30), StochRSI provides an alternative means to identify these extremities. StockRSI is found by applying the Stochastic formula to RSI reading - hence its name. As an indicator of RSI, it measures the value of RSI relative to its high/low range over a set number of periods. When RSI records a new low for the set period, StochRSI will be at 0. When RSI records a new high for the set period, StochRSI will be at 100.

Answer 259

A market breadth indicator that represents the number of stocks in a given group that have closing prices that are currently above their 200-day simple moving average. Common techniques for using this indicator include locating overbought/oversold levels and finding positive or negative divergences between this indicator and the underlying group's composite index.

Answer 260

A market breadth indicator that represents the number of stocks in a given group that have closing prices that are currently above their 50-day simple moving average. common techniques for using this indicator include locating overbought/oversold levels and finding positive or negative divergences between this indicator and the underlying group's composite index.

Answer 261

An instruction to the broker to buy or sell stock when it trades beyond a specified price. They serve to either protect your profits or limit your losses.

Answer 262

A cumulative sum of all daily McClellan oscillator readings that provides longer range analysis of market breadth.

Answer 263

A price level at which there is sufficient demand for a stock to cause a halt in an downward trend and turn the trend up. Support levels indicate the price at which most investors feel that prices will move higher.

Answer 264

A concept based on the use of a filter. Once prices have moved by the distance specified by this filter, a new line is drawn next to the pervious one. In a nutshell, it is a chart that shows up and down prince movement of a minimum size regardless of time it takes.

Answer 265

A sideways chart pattern between two converging trend lines in which the upper trend line is declining and the lower trend line is rising. This pattern represents an even balance between buyers and sellers, although the prior trend is usually resumed. The breakout through either trend line signals the direction of the price trend.

Answer 266

Also called Treasury Bills, they are short-term debt securities issued by the US government. Maturities are usually a year or less and typically run 13, 26, and 52 weeks. Trading in the secondary market, the price of T-Bills rises when interest rates fall and vice versa.

Answer 267

The study of market action, usually with price charts, which includes volume and open interest patterns. Also called chart analysis, market analysis, and more recently, visual analysis.

Answer 268

The difference between the three-month US Treasury rates and the three-month Eurodollar contract. Used to measure the strength of the credit markets.

Answer 269

A bearish reversal pattern consisting of three consecutive black bodies where each day closes near below the previous low, and opens within the body of the previous day.

Answer 270

A bullish reversal pattern consisting of three consecutive white bodies, each with a higher close. Each should open within the previous body and the close should be near the high of the day.

Answer 271

Each individual move from one stock trade to another. An UP-TICK means the price moved up on the last trade and a DOWN-TICK means it moved down. If there is no change from the last trade, the TICK is considered neutral. The TICK statistic on the NYSE is the net of all UP-TICKs minus all DOWN-TICKs at a given point during the day. If 1000 stocks advanced on their last trade or TICK, 500 declined and 200 were unchanged, the TICK would be +500 (1000 minus 500 equals +500). The closing TICK is based not he last trade of the day. TICK statistics are available for the NYSE, Nasdaq and AMEX.

Answer 272

An approach to market analysis used both by fundamental and technical analysts. it often begins with a more "macro" analysis of the overall market through major indices (S&P 500, Dow, NYSE etc.) before concentrating on the market at a more "micro" level. Strong and weak sectors of the market are analyzed before focusing on individual stocks within select groups.

Answer 273

A period where the stock or market is "catching its breath" after an advance, characterized by a flat trading range without any noticeable trend. It is common to see a topping period after a lengthy increase of the stock price. Topping may be a sign of distribution.

Answer 274

A stop-loss level set above or below the current price that adjusts as the price fluctuates. For a long position, a trailing stop would be set below the current price and would rise as the price advances. Should the price decline and reach the trailing stop, then a stop-loss would be triggered and the position closed. As long as the price remains above the trailing stop, the position is held. Indicators such as the Parabolic SAR or moving averages can be used to set trailing stop.

Answer 275

A long-term debt security issued by the US government. Maturities are usually between 20 and 30 years, typically running 20 and 30 years. The 10-year Treasury Note is the benchmark security for US debt. Trading in the secondary market, the price of the Treasury Bonds rises when interest rates fall and declines when interest rates rise.

Answer 276

Medium-term debt securities issued by the US government. Maturities are usually between 2 and 10 years, typically running 2, 5 and 10 years. The yield of the 10-year Treasury Note is commonly used as the benchmark interest rate. Trading in the secondary market, the price of the Treasury Notes rises when interest rates fall and declines when interest rates rise.

Answer 277

Refers to the direction of prices. Rising peaks and troughs constitute an uptrend; falling peaks and troughs consisting a downtrend. A trading range is characterized by horizontal peaks and troughs. Trends are generally classified into major (longer than a year), intermediate (one to six months), or minor (lesson than a month).

Answer 278

Straight lines drawn on a chart below reaction lows (in an uptrend) or above rally peaks (in a downtrend) that determine the steepness of the current trend. The breaking of a tend line usually signals a trend reversal.

Answer 279

Sideways price patterns in which prices fluctuate with converging trend lines. The three types of triangles are symmetrical, the ascending, and the descending.

Answer 280

A bearish Point & Figure chart pattern that forms when the O-Column breaks below the equal lows of the two prior O-columns.

Answer 281

A bullish reversal pattern typically associated with line and bar charts. The pattern forms with three equal lows, at least one intermittent high to mark resistance and a breakout above resistance.

Answer 282

A bullish Point & Figure chart pattern that forms with an X-Column breaks above the equal highs of the two prior X-Columns.

Answer 283

A bearish reversal pattern typically associated with line and bar charts. The pattern forms with three prominent peaks, at least one intermittent low and mark support and break below support.

Answer 284

A momentum indicator showing the percent rate-of-change of a triple exponentially smoothed moving average. Like other oscillators, TRIX oscillates around a zero line. It's triple exponential smoothing makes it an excellent filter of market noise and it functions well as a leading indicator of market trends.

Answer 285

The typical price is the average of the high, low, and close. Typical Price = (High + Low + Close)/3

Answer 286

An oscillator that attempts to combine information for several different time periods into one number. Three different time periods are used, typically a 7-day period, a 14-day period, and a 28-day period. The resulting oscillator is "bounded" in that it moves between 0 and 100 with 50 as the center line. 70 and 30 are used as overbought/oversold levels.

Answer 287

A straight line drawn upward and to the right below the reaction lows. The longer the uptrend line has been in effect and the more times it has been tested, the more significant it becomes. Violation of the trend line usually signals that the uptrend may be changing direction.

Answer 288

A three day bearish pattern that only happens in an uptrend. The first day is a long white body, followed by a gapped open with the small black body remaining gapped above the first day. The third day is also a black day whose body is larger than the second day and engulfs its. The close of the last day is still above the first long white day.

Answer 289

A continuation pattern with a long white body followed by another white body that has gapped above the first one. The third day is black and opens within the body of the second day, then closes in the gap between the first two days, but does not close the gap.

Answer 290

A situation that occurs when prices break above resistance, but soon reverse course and break back below resistance. price are said "thrust" up, but cannot maintain the upward momentum and soon decline. The upthrust can also be referred to as a failed (bullish) signal and is considered bearish. Generally, the reversal should occur within 1-3 days of the resistance breakout for the failed signal to be considered valid. This is the opposite of a spring.

Answer 291

This is computer using a trade-weighted geometric average of six foreign currencies against the dollar.

Answer 292

This is an equally weighted price index of all stocks in the Value Line Investment Survey. It is referred to as "arithmetic" because the index is computer by finding the mean or simple average.

Answer 293

This is an equally weighted price index of Alan stocks in the Value Line Investment Survey. It is referred to as "geometric" because the index is computer by finding the geometric average. A geometric average is calculated by taking the nth root of the product of n terms.

Answer 294

A form of analysis that utilizes charts and market indicators to determine market direction.

Answer 295

A measurement of change in price over a give period. It is usually expressed as an percentage and computer as the annualized standard deviation of the percentage change in daily price. The more volatile a stock or market, the more money an investor can gain (or lose!) in a short time.

Answer 296

A key variable in most option pricing models, including the famous Black-Scholes Option Pricing Model. Other variables usually include: security price, struck price, risk-free rate of return and days to expiration. If all other variable are equal, the security with the highest volatility will have the highest option prices. Many Nasdaq and tech stocks (CSCO and AMGN) have higher volatilities than NYSE and non-tech stocks (G and MRK), and their options are also priced accordingly. One method of measuring volatility is by finding the standard deviation of the underlying security. However, the standard deviation cannot always explain the volatility that is implied by an option's price. Many times the price of an option will reflect more volatility than that measured by the standard deviation. This led to the notion of implied volatility, which is based on option prices. If the option price is known, then plugging in all variable and solving for volatility will yield the implied volatility.

Answer 297

This measures the volatility of the market. A recent news story described it as "the options market's gauge of investor fear." Traders use VIX as a general inverse indicator of market volatility and sentiment. High numbers means that there's excessive bearishness, and low numbers indicate excess bullishness. The VIX is upstate intraday by the Chicago Board Options Exchange (CBOE), using Standard & Poors 500 Index (SPX) bid/ask quotes. It was created in 1993.

Answer 298

The number of trades in a security over a period of time. On a chart, volume is usually represented as a histogram (vertical bars) below the price chart. The NYSE and Nasdaq measure volume differently, For every buyer, there is a seller: 100 shares bought = 100 shares sold. The NYSE would count this as one trade and as 100 shares of volume. However, the Nasdaq would count each side of the trade and as 200 shares volume.

Answer 299

A selling climax or high volume decline that "washes out" all the sellers and paves the way for buyers to take over. This may also take the form of a high volume hammer after an extended decline.

Answer 300

An reversal chart pattern characterized by two converging trend lines that connect at the apex. The wedge is slanted either downwards or upwards demonstrating bullish or bearish behavior respectively.

Answer 301

An upside weekly reversal is present when prices open lower on Monday and then on Friday close above the previous week's close. A downside weekly reversal opens the week higher but closes down by Friday.

Answer 302

A moving average that uses a selected time span, but gives greater weight to the more recent price data. Weighted Close a weighted average of the high, low and close that places more weight on the closing value by counting it twice.

Answer 303

A whipsaw occurs when a buy or sell signal is reversed in a shorten time. Volatile markets and sensitive indicators can cause whipsaw. For example, a whipsaw would occur if an position trader initiates a long position on a bullish MACD crossover and has to close it the next day because of a bearish moving average crossover. The signal was revered and the trader had to exit quickly.

Answer 304

Developer of RSI indicator and the Directional Movement Indicator (DMI) system.

Answer 305

Developed by Larry Williams, Williams %R is a momentum indicator much like the Stochastic Oscillator and is especially popular for measuring overbought and oversold levels. The scale ranges from 0 to -100 with reading from 0 to -20 considered overbought, and reading form -80 to -100 considered oversold. Typically, Williams %R is calculated using 14 periods and can be used on intraday, daily, weekly, or monthly, data.

Answer 306

Perhaps the broadest barometer of US stocks is the Wiltshire 5000 Total Market Index ($WLSH). This index is made up of over 6500 companies from the NYSE, AMEX, Nasdaq. The total market value of the index exceeded $14 trillion at the end of 2000. The index is the NYSE, AMEX and Nasdaq composite indices include preferred shares, ADRs and foreign issues, the Wiltshire 5000 is a pure domestic index of common stocks.

Answer 307

A fifth character appearing at the end of a security's ticker symbol that identifies the society as a mutual fund. For example, the symbol for the PRIMECAP Odyssey Stock Fund (POSKX) ends in an X denote that the security is a mutual fund.

Answer 308

A plot of treasury yields across the various maturities at a specific point in time. At the front (left) of the yield curve are T-Bills with maturities of 12, 26,and 52 weeks. In the middle of Treasury Notes with maturities of 2, 5 and 10 years. At the end (right) of the yield curve are Treasury Bonds with maturities of 20 and 30 years. In normal yield curve, yields rise as the maturities increase. If the yield on shorter maturities is high than that of longer maturities, then an inverted yield curve exists. An inverted yield curve is a sign of tight money and is bearish for stocks.

Answer 309

The Zig Zag overlay is a collection of stir hot lines that connect significant tops and bottoms on a price graph. It takes a single parameter that specifics the percentage that the price must move in order for a new "zip" or "zag" to appear. Zig Zag does not predict trends and should not be used on its own.

Brainscape's Knowledge GenomeTM

Stock Definations Flashcards

Brainscape's Knowledge Genome^TM