Technical Analysis Definitions

An Ascending Triangle is a bullish continuation pattern formed by a horizontal resistance line and a rising trendline. It indicates increased buying pressure, with traders expecting a breakout above the resistance level.

A Breakout occurs when the price moves above a resistance level, while a Breakdown happens when the price falls below support. Both signals indicate a potential trend continuation or reversal, depending on the market context.

A Broadening Pattern is a chart formation characterized by diverging trendlines, creating a widening price range. It suggests increasing volatility and uncertainty, often preceding sharp reversals or strong trend movements.

A Channel is a price pattern formed by parallel lines that contain price movements. An Ascending Channel indicates a bullish trend, a Descending Channel suggests a bearish trend, and a Horizontal Channel indicates consolidation.

Consolidation refers to a period of price stability where the market moves within a narrow range. It typically precedes a breakout or breakdown, as traders await clearer direction before making significant moves.

Continuation Patterns are chart formations that signal the continuation of an existing trend. Common examples include flags, pennants, triangles, and rectangles. Traders use these patterns to identify opportunities to re-enter a trend.

The Cup and Handle is a bullish continuation pattern resembling a teacup with a small downward handle. It indicates a temporary consolidation before the trend continues upward, often seen as a reliable entry point for traders.

A Diamond Top signals a bearish reversal, while a Diamond Bottom indicates a bullish reversal. Both patterns are formed by converging and diverging trendlines, suggesting a potential price reversal upon breakout.

A Double Bottom is a bullish reversal pattern consisting of two consecutive lows at approximately the same price level, separated by a peak. It indicates strong support and potential upward movement upon breaking the resistance level.

A False Breakout occurs when the price temporarily moves beyond a support or resistance level before reversing. Bull Traps lure buyers into false upward breakouts, while Bear Traps mislead sellers during false downward breakouts.

A Flagpole is the initial strong price movement preceding a flag or pennant pattern. It represents a sharp upward or downward price movement, which is followed by consolidation before a potential continuation of the trend.

A Gap is a price difference between consecutive trading sessions. Breakaway Gaps signal the start of a new trend, Runaway Gaps indicate trend continuation, and Exhaustion Gaps suggest the end of a trend.

An Island Reversal is a reversal pattern characterized by a gap-up or gap-down followed by a consolidation phase and a subsequent gap in the opposite direction. It signals a sudden shift in market sentiment.

A Measured Move consists of a strong price movement, a consolidation phase, and a continuation of the original direction. Traders estimate the potential move by measuring the length of the initial trend and projecting it forward.

Overbought describes a market condition where prices have risen too quickly and may be due for a correction. Oversold indicates prices have fallen excessively and may be primed for a reversal. Technical indicators often help identify these conditions.

A Pennant is a continuation pattern formed by converging trendlines during a brief consolidation period following a strong price move. It resembles a small symmetrical triangle and indicates a potential continuation of the preceding trend.

A Pivot High is a peak where price reverses from an uptrend to a downtrend, while a Pivot Low is a trough where price changes from a downtrend to an uptrend. Identifying pivot points helps traders spot trend reversals and potential entry or exit points.

Price Action refers to the movement of a security’s price over time, often analyzed without indicators. Traders study patterns, trends, and support/resistance levels to make informed trading decisions.

A Pullback is a temporary decline within an existing upward trend. It provides traders with opportunities to enter positions at more favorable prices before the trend continues.

A Rectangle Pattern is a continuation pattern where prices move within a horizontal range defined by parallel support and resistance levels. Breakouts from rectangles often signal strong directional moves.

A Rounding Bottom is a bullish reversal pattern indicating a gradual shift from a downtrend to an uptrend. It is characterized by a U-shaped curve, suggesting accumulation and renewed buying interest.

A Support Zone is an area where a security’s price consistently finds buying interest, preventing further decline. A Resistance Zone is an area where selling pressure prevents the price from rising further.

A Swing High is a peak reached before the price declines, while a Swing Low is a trough reached before the price rises. They help traders identify trends, support/resistance levels, and potential reversal points.

A Symmetrical Triangle is a continuation pattern formed by converging trendlines with lower highs and higher lows. It signals market indecision, with a breakout indicating the potential direction of the new trend.

A Trend Reversal occurs when the price changes direction from an existing trend to a new, opposite trend. Reversals can be bullish or bearish and are often identified using technical indicators or chart patterns.

Trend Strength measures the intensity and reliability of a market trend. Traders often use indicators like the Average Directional Index (ADX) to evaluate whether a trend is gaining or losing momentum.

A Triple Bottom is a bullish reversal pattern consisting of three roughly equal lows, indicating strong support. A breakout above the pattern’s resistance suggests a potential upward trend.

A Triple Top is a bearish reversal pattern where the price reaches a similar high three times before declining. It indicates strong resistance and signals a potential downward trend once support is broken.

A Wedge is a chart pattern formed by converging trendlines. A Rising Wedge signals a potential bearish reversal, while a Falling Wedge suggests a bullish reversal. They often precede significant price movements.

Volume Profile is a technical tool that displays trading volume across different price levels rather than over time. It helps traders identify areas of high buying or selling interest and potential support or resistance levels.