Technical Analysis Terms

Here are definitions of some of the most frequently used technical analysis techniques and chart patterns:

• Support Level - Within the universe of securities exchange, the support level is the lowest price a stock trades, over a period of time. The price stops dropping because buyers start to outnumber sellers. The longer the price stays at a particular level, the stronger the support at that level. The stronger the support at a given level, the less likely it will break below that level in the future. - a level below which the price will not likely fall.
• Resistance Level - The resistance level is the highest price a stock trades at over a period of time. The price stops rising because sellers begin to outnumber buyers. The more times the price reaches a particular level of resistance and fails to break through, the stronger the resistance at that level. For this reason, the stronger the resistance, the less likely the price will break through that level. - a level above which the price will not likely rise.
• Breakout - when a stock rises above its resistance level or below its support level.
• Trend line - a line that predicts future prices based on past prices.
• Trend line penetration - when a price crosses Bollinger bands, or some other measure of the range of standard deviation of the trend line.
• Moving Averages - the average price of a stock calculated and recalculated for a specific number of days. Several types : simple moving average; weighted moving average; exponential moving average.
• Momentum - ratio of a short term moving average to a long term moving average
• Commodity Channel Indicator -
• Relative Strength - The Relative Strength Index (RSI) is a technical analysis indicator that compares the days that a stock finishes up against when it finishes lower. The RSI ranges from 0 to 100, but a stock is considered overbought if it reaches the 70 level, meaning that the stockholder should consider selling. When it is a true bull market, an RSI of 80 might be a better level since stocks often trade at higher valuations. Likewise, if the RSI approaches 30, it is a strong buying indicator (20 in a strong bear market) - ratio of the % price change of a stock to the % price change of a broader index.
• Bollinger bands - a range of price volatility based on the standand deviation on a moving average or trend line.
• Moving average (volume) - the moving average of the daily volume (rather than price) of trades.
• Gann lines and Gann angles -
• Triangle -
• Ascending bottom -
• Broadening foundation -
• Head and shoulders -
• Inverse head and shoulders -
• Triple top -
• Arms Index (TRIN) -
• Money flow -
• Point and figure charts -