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Technical Analysis > Tech Analysis Tutorial > Flashcards

Tech Analysis Tutorial Flashcards

1
Q

Uptrend

A

Each successive peak and trough is higher

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2
Q

Downtrend

A

Each successive peak and trough is lower

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3
Q

Major trend

A

> 1 year

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4
Q

Intermediate trend

A

1-3 months

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5
Q

Near term trend

A

<1 month

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6
Q

Long term trend

A

Several intermediate trends which often move against the major trend

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7
Q

Channel

A

Two parallel trend lines that act as support and resistance

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8
Q

Round numbers

A

Important levels of support and resistance — trader psychology

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9
Q

Role reversal

A

When price breaks through it, resistance will often become support and support will often become resistance

Note: breaks through s & r can be trend accelerating OR reversing

Note: avoid trading around s & r’s — lots of volatility

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10
Q

Why is volume important?

A

High volume = stronger, more relevant move

Volume not moving with trend is sign of trend weakening

Low volume in chart pattern = weaker signal

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11
Q

Divergence

A

Contradiction between two indicators — e.g clear uptrend on declining volume

Signals direction of price trend is weakening

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12
Q

Linear vs. Logarithmic Scale

A

Linear (arithmetic) scale = set distance between points (e.g $10)

Logarithmic = set distance in terms of percentage change (e.g 10% increase)

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13
Q

Line Chart

A

Closing prices over set period of time

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14
Q

Bar chart

A

Vertical lines = high and low for each period

Horizontal dash left = open price
Horizontal dash right = close price

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15
Q

Candlestick chart

A

Vertical line = high and low for trading period

Wide bar (candle) = dif between open and close

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16
Q

Point and figure chart

A 
X’s = upward price trend
O’s = downward price trend

Reversal criteria — how far price moves to turn x’s to o’s and vice versus

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17
Q

Reversal & continuation patterns

A

Reversal = trend will reverse upon pattern completion

Continuation = trend will continue

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18
Q

Head & Shoudlers

A

Weakening in trend, deterioration in successive highs and lows. Security is likely to move against previous trend

Inverse head and shoulders = reversal of downtrend

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19
Q

Cup & Handle

A

Bullish continuation pattern

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20
Q

Double tops & bottoms

A

Come after sustained trend, signal trend is about to reverse.

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21
Q

Symmetrical triangle

A

Two trendlines converge.

Breakout to either upside or downside

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22
Q

Ascending triangle

A

Generally bullish, upside breakout

A couple weeks to several months

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23
Q

Descending triangle

A

Generally bearish, downside breakout

A couple weeks to several months

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24
Q

Flag or pennant

A

Sharp move followed by sideways move w/ converging (pennant) or parallel but slanted (flag) trendlines, ends in sharp move in same direction as beginning

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25
Q

Wedge

A

Either continuation or reversal
Symmetrical triangle that slants in up or down direction

Falling wedge = bullish
Rising wedge = bearish

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26
Q

Types of gaps

A

Breakaway gap = start of trend

Runaway gap = middle of trend

Exhaustion gap = end of trend

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27
Q

Tripe tops & bottoms

A

Signals reversal

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28
Q

Rounding bottom

A

Long term reversal from down to uptrend.

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29
Q

Simple moving average (SMA)

A

Sum of all past closing prices divided by number of prices

Increasing number of prices (length of period) makes it less responsive

One of best ways to gauge long term trend strength

30
Q

Linear weighted average

A

??

31
Q

Exponential moving average (EMA)

A

Places higher weight on more recent date points

Regarded as much more efficient than linear weighted average

32
Q

Major uses of moving averages

A

Identify trends and reversals

Set up support and resistance levels

33
Q

Moving average upward with price above it

A

Uptrend

34
Q

Moving average downward with price below it

A

Downtrend

35
Q

Short term average above long term average

A

Uptrend

36
Q

Long term average above short term average

A

Downtrend

37
Q

One moving average crossing through another

A

Reversal

Short term if short term moving averages are used, long term reversal of longer moving averages used

38
Q

Leading & lagging indicators

A

Leading = precedes price movement. Strongest during sideway or non-trending ranges.

Lagging = confirms price movement

39
Q

Oscillators

A

Indicators bound within a range, e.g 1-100 with 100 = overbought and 1 = oversold

40
Q

Accumulation/distribution line

A

= ((close - low) - (high - close)) / (high - low) * period’s volume

Attempts to measure ratio of buying to selling

If price and A/D are moving in opposite directions, it signals reversal in direction of A/D line

41
Q

Average directional index (ADX)

A

Measures trend strength

Calculated using current and previous highs and lows and previous closes for at least 14 periods

ADX is smoothed combination of +DI line and
-DI line

42
Q

Aroon indicator

A

Concept is that security will regularly reach new highs in uptrend and new lows in downtrend.

Measures strength of up or down trends, whether new trend is beginning

Up line = amount of time since last highest price during a period

Down line = time since last lowest

43
Q

Aroon oscillator

A

Plots difference between up and down lines.
Range of -100 to 100
Higher value = upward strength
Lower value = downward pressure

44
Q

Moving average convergence divergence (MACD)

A

MACD = shorter term EMA - longer term EMA

Difference between two exponential moving averages plotted against “signal line” (EMA of MACD, usually 9-day)

Note: Shorter EMA signal line used for more volatile securities, longer for less volatile

45
Q

MACD histogram

A

Histogram is difference between MACD and signal line

Higher bars = more momentum

46
Q

MACD crosses below signal line

A

Sell signal

47
Q

MACD crosses above signal line

A

Buy signal

48
Q

RSI

A

Relative strength index

Momentum indicator calculated using average percentage gain or loss at close during a certain period.

Indicates wether security is oversold or overbought.

49
Q

RSI overbought

A

> 70

50
Q

RSI oversold

A

<30

51
Q

On-balance volume (OBV)

A

Plots wether volume is up (+) or down (-)

52
Q

Stochastic oscillator

A

Momentum indicator calculated using most recent closing price, highest and lowest closing price within a certain period to indicate wether a security is oversold or overbought.

Concept is price should be closing near highs in uptrend and near lows in downtrend

Uses %K and %D (SMA of %K) lines

53
Q

Stochastic oscillator overbought

A

> 80

54
Q

Stochastic oscillator oversold

A

<20

55
Q

Cup & handle duration

A

Several months to over a year

56
Q

Double tops & bottoms duration

A

Signal intermediate and long term trend reversals

57
Q

Triangles duration

A

A couple weeks to several months

58
Q

Flag and pennant duration

A

Short term continuation pattern — 1-3 weeks

59
Q

Wedge duration

A

3-6 months

60
Q

Rounding bottom duration

A

Several months to several years

61
Q

Upward and downward accumulation/distribution line

A

Line trending upward = more buying than selling

Line trending downward = more selling than buying

62
Q

ADX absent or weak trend

A

<20

63
Q

ADX strong trend

A

> 40

64
Q

Aroon oscillator and price trend moving in opposite directions

A

Reversal warning

65
Q

Aroon oscillator crosses 0 (center line)

A

Reversal

66
Q

+MACD

A

Short term EMA above long term, upward momentum

67
Q

-MACD

A

Long term EMA above short, downward momentum

68
Q

Does a break beyond support or resistance signal a trend reversal?

A

Not always. Can be acceleration.

69
Q

Should you place orders near support or resistance levels?

A

No. Too much volatility and price often only flirts with these levels. Place it a few points above support.

70
Q

Positive Aroon Oscillator value

A

Upward strength

71
Q

Negative Aroon oscillator value

A

Downward strength

72
Q

%K and %D

A

The two lines on the stochastic oscillator

%K is the raw measure

%D is a moving average of %K and the more important line

Technical Analysis (1 decks)

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