Technical Analysis Flashcards
The study of collective market sentiment as expressed in buying and selling of assets
Technical Analysis
- Reports that price and volume reflect the collective behavior of buyers and sellers
- Uses only the firms share price and trading volume data to project a target price.
Analysis which attempts to determine the intrinsic value of an asset
Fundamental Analysis
*Uses the firms financial statements and other information to analyze its financial position
Chart that maps the high and lows of each period
Bar Charts
Chart that uses the same data as the bar chart, but displays a box bounded by the opening and closing prices. The box is open if price increases. The box is closed if the price decreases.
Candlestick Chart
A chart helpful in identifying changes in the direction of price movements. Price is on the y-axis, the number of directional changes is on the x-axis.
Print and Figure Chart
A calculation of the ratios of an assets closing price to benchmark values, and draws a line chart of the ratios.
Relative Strength Analysis
When selling is supposed to emerge that prevents further price increases.
Resistance levels
In an uptrend, the trendline connects
the increasing lows in price.
If price crosses, trendline by a significant amount, a breakdown occurs, signaling an end to that period of increasing lows. (FOR UPTREND)
…
In a downtrend, the trendline connects
the decreasing highs in price.
If price crosses the trendline by a significant amount, a breakout occurs, signaling the end of that period of decreasing highs. (FOR DOWNTREND)
…
When buying is expected to emerge to prevent further price decreases.
Support Level
The belief that breached resistance levels become support levels and the breached support levels become resistance levels.
Change in Polarity
Patterns that occur when a trend approaches a range of prices but fails to continue beyond that range.
Reversal Patterns
A pattern that suggests that demand has been pricing the uptrend is fading, especially if the highs in the pattern occur on declining volume.
Head and Shoulders Pattern
*Analysts use the difference in price between the “head”, the highest price reached, and the “neckline”, the support level to which the price retraced after the “left shoulder” and “head” have formed.
A pattern that suggests a pause in trend rather than reversal
Continuation patterns
- triangles form when prices reach lower highs, and higher lows over a period of time and converge.
- Rectangles form when trading temporarily forms a range between a support level and a resistance level.
- **Flags = ST Rectangles
- *** Pennants = ST Triangles
Moving Average Lines (MALs) are used to smooth fluctuations in a price chart
MALs = mean of last n closing prices
When the ST average crosses above LT average, signaling buy into uptrend.
Golden Cross
When ST average crosses below LT average, signals sell into downtrend.
Dead Cross
Indicators that are constructed based on the standard deviation of closing prices over the last n periods.
Bollinger Bands
Indicators used to identify overbought or oversold markets. Or convergence and divergence.
Oscillators
- the are indicators based on market prices but scaled so that they “oscillate” around a given value, or between 2 values.
- Extreme high values signal overbought market
- *Extreme low values signal oversold market
An oscillator calculated as 100 times the difference between the latest closing price and the closing price n periods later.
Rate of Change Oscillator (ROC) or momentum oscillator.
- buy when oscillator goes from - to +, signaling uptrend.
- sell when oscillator goes from + to -, signaling downtrend
An index based on the ratio of total price increases to total price decreases of a selected number of periods.
Relative Strength Index (RSI)
- Oscillates between 0 and 100
- 70 is overbought. 30 is oversold.
Indicators that is drawn using exponentially smoothed moving averages, which place greater weight on more recent observations.
Moving Average Convergence / Divergence Lines
- Oscillates around 0 with no bounds.
- indicates overbought and oversold markets, as well as convergence / divergence.
