A change in the direction of a price trend. On a price chart, reversals undergo a recognizable change in the price structure. An uptrend, which is a series of higher highs and higher lows, reverses into a downtrend by changing to a series of lower highs and lower lows. A downtrend, which is a series of lower highs and lower lows, reverses into an uptrend by changing to a series of higher highs and higher lows. Also referred to as a "trend reversal", "rally" or "correction". A reversal can be a positive or negative change against the prevailing trend. Technical analysts watch for these patterns because they can indicate the need for a different trading strategy on the same security. For example, if a technical analyst holds stock ABC and notices a reversal pattern, he or she may want to consider closing his or her existing long position and assuming a short position to capitalize on the potential downward movement of the stock's price.
A type of equity named after the portion of the Internal Revenue Code that describes its treatment under tax law. Section 1244 of the tax code allows losses from the sale of shares of small, domestic corporations to be deducted as ordinary losses instead of as capital losses up to a maximum of $50,000 for individual tax returns or $100,000 for joint returns. Taobiz explains Section 1244 Stock To qualify for section 1244 treatment, the corporation, the stock and the shareholders must meet certain requirements. The corporation's aggregate capital must not have exceeded $1 million when the stock was issued and the corporation must not derive more than 50% of its income from passive investments. The shareholder must have paid for the stock and not received it as compensation, and only individual shareholders who purchase the stock directly from the company qualify for the special tax treatment. This is a simplified overview of section 1244 rules; because the rules are complex, individuals are advised to consult a tax professional for assistance with this matter.
The amount of price movement required to shift a chart to the right. This condition is used on charts that only take into consideration price movement instead of both price and time. In the context of point and figure (P&F) charts, the reversal amount is the number of boxes (an X or an O) required to cause a reversal. A reversal would be represented by a movement to the next column and a change of direction. If you increase the reversal amount, you will remove columns corresponding to less significant trends and make it easier to detect long-term trends. In terms of Kagi charts, it is the amount (generally around 4%) needed to change the direction of the vertical lines.
A stock that is considered riskier than blue chips because it has a smaller market capitalization. Taobiz explains Secondary Stock This is another term for "small cap."
A component of the Ichimoku Kinko Hyo indicator that is used to measure momentum and future areas of support and resistance. Senkou span A is always plotted alongside Senkou span B and the area between the two lines is filled with shaded indicator lines, also known as the cloud, which is used by traders to predict levels of future support/resistance. Senkou span A is calculated by using the following formula: The trend is deemed to be downward when Senkou span A is located below senkou span B. In practice, the indicator is most commonly used to predict the reversal of a current trend when the senkou spans cross over each other.
1. The issuance of new stock for public sale from a company that has already made its initial public offering (IPO). Usually, these kinds of public offerings are made by companies wishing to refinance, or raise capital for growth. Money raised from these kinds of secondary offerings goes to the company, through the investment bank that underwrites the offering. Investment banks are issued an allotment, and possibly an overallotment which they may choose to exercise if there is a strong possibility of making money on the spread between the allotment price and the selling price of the securities. 2. A sale of securities in which one or more major stockholders in a company sell all or a large portion of their holdings. The proceeds of this sale are paid to the stockholders that sell their shares. Often, the company that issued the shares holds a large percentage of the stocks it issues. Taobiz explains Secondary Offering 1. This sort of secondary public offering is a way for a company to increase outstanding stock and spread market capitalization (the company's value) over a greater number of shares. Secondary offerings in which new shares are underwritten and sold dilute the ownership position of stockholders who own shares that were issued in the IPO. 2. Typically, such an offering occurs when the founders of a business (and perhaps some of the original financial backers) determine that they would like to decrease their positions in the company. This kind of secondary offering is common in the years following an IPO, after the termination of the lock-up period. Owners of closely held companies sell shares to loosen their position - usually gradually, so that the company's share price doesn't plummet as a result of high selling volume. This kind of offering does not increase the number of shares of stock on the market, and it is most commonly performed in the case of a company that is very thinly traded. Secondary offerings of this sort do not dilute owners' holdings, and no new shares are released. There is no "new" underwriting process in this kind of offering.
A proactive trading strategy carried out by selling out of a long or into a short position when the price of the asset being traded is still rising but is expected to reverse in price. Opposite of "buying into weakness". For example, say a trader believes ABC stock will rise above $5.00 but expects it to reverse at $5.75. If the trader buys ABC stock at $5.00 and sells when the price hits a predetermined exit price of $5.50, that trader would be selling into strength. Conversely, a short seller may sell into a rising price with the anticipation that the stock price will soon decline. Many traders will wait for confirmation of a change in price movement before reacting. However, by the time a reversal is /confirm/ied, it may be too late and the trader may end up losing. Thus, by trading against the prevailing trend in the anticipation that it will soon reverse, the trader allows him- or herself a greater margin of safety. As the saying goes, "missed money is better than lost money".
A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. The national exchanges - such as the New York Stock Exchange and the NASDAQ are secondary markets. Secondary markets exist for other securities as well, such as when funds, investment banks, or entities such as Fannie Mae purchase mortgages from issuing lenders. In any secondary market trade, the cash proceeds go to an investor rather than to the underlying company/entity directly. Taobiz explains Secondary Market A newly issued IPO will be considered a primary market trade when the shares are first purchased by investors directly from the underwriting investment bank; after that any shares traded will be on the secondary market, between investors themselves. In the primary market prices are often set beforehand, whereas in the secondary market only basic forces like supply and demand determine the price of the security. In the case of assets like mortgages, several secondary markets may exist, as bundles of mortgages are often re-packaged into securities like GNMA Pools and re-sold to investors.
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