Technical analysis

26 terms · each links to a full explanation with a worked example and the exam traps

ADXAn oscillator running from zero to 100 that measures how strong a trend is, without indicating whether that trend is up or down.
Ascending triangleA chart pattern of rising swing lows against one flat resistance level — a bullish continuation pattern signalling that buyers are gradually overpowering sellers before a breakout.
Bar chartA technical-analysis chart showing each period's Open, High, Low and Close as a single vertical bar with side ticks — used to study price range and volatility.
Bollinger bandsA technical indicator that plots bands a set number of standard deviations either side of a moving average, treating prices at the upper band as overbought and at the lower band as oversold.
ChannelTwo parallel trendlines, one through the highs and one through the lows, boxing price action into a range — traders trade within it, or watch for a breakout from it.
Congestion areaA price range where a stock trades repeatedly for an extended period, typically several weeks, before eventually breaking out upward or downward.
Dark Cloud CoverA bearish two-candle reversal near the top of a congestion area: a bullish candle, then a gap-up candle that turns bearish and closes below the midpoint of the first.
Dow TheoryCharles Dow's six-tenet framework: the market discounts everything, moves in primary, secondary and tertiary trends, must be confirmed by indices and volume, and trends persist until clearly reversed.
Engulfing patternA two-candle reversal pattern in which the second candle's real body completely swallows the first candle's body — green over red is bullish, red over green is bearish.
Flag and pennantContinuation patterns in which price pauses sideways after a sharp rally — in a rectangle (flag) or a small triangle (pennant) — before the original move resumes.
HammerA bullish reversal candle that appears after a price decline — a small real body with a lower tail at least twice that body — valid only once the next candle confirms by moving the price up.
Hanging ManA bearish reversal candle that appears after an up move — a small real body with a long lower shadow at least twice that body — and it is only a warning until the next candle closes lower.
Heikin-Ashi chartA chart of adjusted candlesticks that average price data to reduce noise, giving a clearer view of the trend and helping a trader stay in a position through whipsaws.
Line chartThe simplest price chart: a single continuous line joining closing prices over time, good for reading a trend quickly but blind to the open, high and low.
MACDMoving Average Convergence Divergence — the gap between the 12- and 26-period EMAs, read against its own 9-period EMA, to track shifts in momentum rather than price.
Moving averageThe average price of a share over a rolling window, recalculated each session — it smooths away daily noise so that the underlying trend, and changes in it, become visible.
Piercing PatternA bullish two-candlestick reversal pattern near the bottom of a trading range — a red candle followed by a green candle whose body covers at least half the red candle's body.
Point and Figure chartA chart that plots only price movement using columns of X and O marks, ignoring both time and volume entirely — used to filter noise and spot breakout, support and resistance levels.
Primary trendThe dominant, long-term direction of a market or stock — bull, bear or sideways — typically lasting a year or more, driven by macro-economic forces and investor sentiment.
Renko chartA chart built from fixed-size price "bricks" instead of time intervals, used to filter out minor price noise and make the underlying trend easier to read.
Role reversalThe technical-analysis principle that once a support level is broken it tends to become resistance, and once a resistance level is broken it tends to become support.
RSIA momentum oscillator scaled 0 to 100 that measures the speed and size of recent price changes — conventionally read as overbought above 70 and oversold below 30.
Secondary trendAn intermediate correction or rally that runs counter to the dominant primary trend, typically lasting a few weeks to a few months, before the primary trend resumes.
Support and resistancePrice levels where a move tends to pause or reverse — support where demand concentrates and forms a floor, resistance where supply concentrates and forms a ceiling.
Technical analysisForecasting price direction from past price and volume alone, on the assumption that everything worth knowing about a company is already in its price.
Tertiary trendThe smallest of Dow Theory's three trends — a short-term move of a few days to a few weeks, often running against the primary or secondary trend.