In technical analysis, the movement of an asset's price within a well-defined pattern or barrier of trading levels. Consolidation is generally regarded as a period of indecision, which ends when the price of the asset breaks beyond the restrictive barriers. Periods of consolidation can be found in charts covering any time interval (i.e. hours, days, etc.), and these periods can last for minutes, days, months or even years. Lengthy periods of consolidation are often known as a base. The levels of resistance and support within the consolidation are created through the upper and lower bounds of the stock's price. once the price of the asset breaks through the identified areas of support or resistance, volatility quickly increases and so does the opportunity for short-term traders to generate a profit.
A pattern on bar charts resembling a cup with a handle. The cup is in the shape of a "U" and the handle has a slight downward drift. The right-hand side of the pattern has low trading volume. It can be as short as seven weeks and as long as 65 weeks. As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for four days to four weeks... then it takes off. Below is an example of a cup and handle chart pattern: A couple points on trying to detect cup and handles: Length - Generally, cups with longer and more "U" shaped bottoms, the stronger the signal. Avoid cups with a sharp "V" bottoms. Depth - Ideally, the cup should not be too deep. Also, avoid handles which are too deep since the handles should form in the top half of the cup pattern. Volume - Volume should dry up on the decline and remain lower than average in the base of the bowl. It should then increase when the stock finally starts to make its move back up to test the old high. Retest (of old high) - doesn't have touch or come within a few ticks of old high. However, the further the top of the handle is away from the highs, the more significant the breakout needs to be.
The point on a stock chart when a security and an indicator intersect. Crossovers are used by technical analysts to aid in forecasting the future movements in the price of a stock. In most technical analysis models, a crossover is a signal to either buy or sell. Below we have a stock that falls below its 20-day moving average - a bearish sign. An example of a crossover would be when the security line breaks through its 25-day moving average which may be a signal to buy the stock. Some of the indicators that use crossovers are "moving average" and "Bollinger bands".
The movement of a security's price against the current trend. A countermove occurs soon after the original trend and in the opposite direction, but by a lesser amount. Countermoves allow investors to try to "buy low, sell high," by taking advantage of the price retreating along the current trend to obtain a better entrance.Also known as a retracement. Gains had by trading on countermoves are usually smaller because the full market swings are not recognized. Risk of loss is also high because traders often mistake a reversal for a countermove or retracement. For this reason, having a stop-loss in place is imperative.For example, if the stock price moves up $15 and stays around the new level, it is just considered a move. But if the stock price moves up $15 then quickly moves down $11, it could be considered a countermove.
A type of analysis an investor, analyst or portfolio manager may conduct on a company in relation to that company's industry or industry peers. The analysis compares one company against the industry it operates within, or directly against certain competitors within the same industry, in an attempt to discover the best of the breed. When conducting a cross-sectional analysis, the analyst seeks to identify, by using comparative metrics, the valuation, debt-load, future outlook and/or operational efficiency of the target company. This allows the analyst to evaluate the target company's efficiency in these areas, and to make the best investment choice among a group of competitors or the industry as a whole.When comparing the target firm to competitors, the analyst must be careful to consider the unique operating characteristics of each company and how that will affect any comparative metrics used.
A trend analysis using point and figure charts to estimate the vertical movement of prices. Count calculations are based upon past sideways price movements and are used to gauge the probability that a price target will be reached. This is used by traders to ascertain whether certain positions are profitable.
A trading strategy where an investor attempts to make small gains through a series of trades against the current trend. It is also known as "counter-trend trading". Contrarian investors perform counter-trend trading strategies - purchasing shares when prices are low and selling when they're high. The investor receives smaller gains since the full market swing is not recognized. Many counter-trend investors use momentum indicators to determine the best times to execute their trades.
A schematic tree-shaped diagram used to determine a course of action or show a statistical probability. Each branch of the decision tree represents a possible decision or occurrence. The tree structure shows how one choice leads to the next, and the use of branches indicates that each option is mutually exclusive. A decision tree can be used to clarify and find an answer to a complex problem. The structure allows users to take a problem with multiple possible solutions and display it in a simple, easy-to-understand format that shows the relationship between different events or decisions. The furthest branches on the tree represent possible end results.