Technical Analysis Flashcards

All 32 terms in this deck

The full list, for reference and search.

Average True Range (ATR)

Average true range measures how much a security typically moves per bar, averaged over 14 periods by default.

Bear Flag

A bear flag is the downside continuation pattern: a steep decline (the pole) followed by a weak upward drift (the flag), resolved by a breakdown that extends the decline.

Bear Trap

A bear trap is the mirror of a bull trap: a breakdown below support that quickly reverses back above the level, trapping traders who shorted the break and stopping out longs at the exact low.

Bollinger Bands

Bollinger Bands are a volatility envelope consisting of a 20-period simple moving average plus an upper and lower band set 2 standard deviations above and below it.

Bull Flag

A bull flag is a continuation pattern: a sharp advance (the pole) followed by a tight, downward-drifting consolidation (the flag), with the expectation that a breakout from the flag resumes the advance.

Bull Trap

A bull trap is a breakout above resistance that fails almost immediately, reversing back below the level and stranding the buyers who chased the break.

Candlestick Chart

A candlestick chart displays four prices per time period: the open, high, low, and close, drawn as a rectangular body with thin wicks above and below.

Correlation

Correlation measures how closely two assets move in relation to each other, expressed as a number from -1 to +1.

Cup and Handle

The cup and handle is a bullish continuation pattern: a rounded, U-shaped base (the cup) that returns to the prior high, followed by a smaller, shallow pullback (the handle) before a breakout above the rim.

Death Cross

A death cross occurs when the 50-day moving average crosses below the 200-day moving average, marking the point where intermediate-term weakness has dragged below the long-term trend.

Divergence

Divergence is a disagreement between price and an indicator: price makes a new high or low, but the oscillator tracking it does not.

Doji

A doji is a candlestick whose open and close land at nearly the same price, leaving a body so thin it looks like a cross or plus sign.

Double Bottom

A double bottom is a reversal pattern in which price makes two lows at roughly the same level, separated by a bounce, then breaks above the high between them: the W shape.

Double Top

A double top is a reversal pattern in which price hits roughly the same high twice, separated by a pullback, and then breaks below the low between the peaks.

Engulfing Candle

An engulfing candle has a body that completely covers the prior candle's body: a bullish engulfing closes above the previous open after opening below the previous close, and a bearish engulfing does the reverse.

Exponential Moving Average (EMA)

An exponential moving average weights recent prices more heavily than older ones, using a smoothing multiplier of 2 / (N + 1) applied to each new close.

Fibonacci Retracement

Fibonacci retracement is a charting tool that divides a completed price move into standard fractions, 23.6%, 38.2%, 50%, 61.8%, and 78.6%, to project where a pullback might stall.

Golden Cross

A golden cross occurs when the 50-day moving average crosses above the 200-day moving average, signaling that intermediate-term price strength has overtaken the long-term trend.

Hammer

A hammer is a candlestick with a small body near the top of its range and a lower wick at least twice the body's height, printed after a decline.

Head and Shoulders

A head and shoulders is a topping pattern made of three peaks: a left shoulder, a higher head, and a right shoulder that fails to reach the head's high, all connected underneath by a support line called the neckline.

MACD

MACD (moving average convergence divergence) is a momentum indicator built from three EMAs: the MACD line is the 12-period EMA minus the 26-period EMA, the signal line is a 9-period EMA of the MACD line, and the histogram plots the gap between the two.

Moving Average

A moving average is the average closing price of a security over the last N periods, recalculated as each new period completes so the value rolls forward with the chart.

Overbought

Overbought describes a market that has risen far enough, fast enough that momentum oscillators reach the top of their scales: RSI above 70 or the stochastic oscillator above 80 are the standard definitions.

Oversold

Oversold describes a market that has fallen hard enough that momentum oscillators hit the bottom of their scales: RSI below 30 or a stochastic reading below 20 by convention.

Resistance

Resistance is a price area where a rising stock has repeatedly stalled because sellers unload enough supply to cap the advance.

RSI (Relative Strength Index)

RSI is a momentum oscillator that measures the speed of recent price changes on a 0-100 scale, calculated over 14 periods by default.

Simple Moving Average (SMA)

A simple moving average is the arithmetic mean of the last N closing prices: add the closes, divide by N, and roll the window forward one bar at a time.

Standard Deviation

Standard deviation measures how much an investment's returns vary around their average, and it is the most common statistical stand-in for volatility in finance.

Stochastic Oscillator

The stochastic oscillator locates the current close within the recent high-low range, on a 0-100 scale.

Support

Support is a price area where a falling stock has repeatedly stopped dropping because buyers step in with enough size to absorb the selling.

Technical Analysis

Technical analysis studies historical price and volume patterns to forecast future price movement, on the premise that patterns in how a stock has traded tend to repeat because they reflect recurring crowd psychology: fear, greed, and herd behavior.

Trend Line

A trend line is a straight line drawn across successive swing lows in an uptrend or successive swing highs in a downtrend, marking the slope of the move.