Series 7: Analysis- Technical Analysis

Resistance Level

A price above the current market, through which a stock's price tends not to rise -The stock is "resisting" further price rises

Overbought Condition

-Market is approaching a peak -The next market move is likely to be a decline -Selling is expected

Oversold Condition

-Market price averages are decreasing daily -The number of declining issues is decreasing relative to the number of advancing issues -The next market move is likely to be upwards

Head and Shoulders Bottom Formation

A head and shoulders bottom formation is bullish since the market has bottomed out and is now moving back upwards. It is a downtrend that has reversed itself.

Head and Shoulder Top Formation

A head and shoulders top formation is bearish since the market has topped out and is trending down. It is an uptrend that has reversed itself.

Support Level

A price below the current market, through which a stock's price tends not to fall -Has "support" at this price because investors are willing to buy at this price -If the stock breaks the support level, this is bearish since all the ready buyers have been cleaned out

Monetary Environment

A reflection of whether credit is easy or tight as shown by interest rate levels, money supply levels, and fiscal policies of the government

Saucer Formation

A saucer formation is bullish since the market has bottomed out and is now moving back upwards. It is a downtrend that has reversed itself.

Inverted Saucer Formation

An inverted saucer is bearish since the market has topped out and is trending down. It is an uptrend that has reversed itself.

The advance/decline theory

Measures the relative strength of the market by comparing the number of issues advanced to the number of issues declined -A technical factor

Consolidating Market

The market is said to be "consolidating" when prices are flat - not moving in any direction for a long period after a previous price rise or fall.

Things that a technical analyst examines

To evaluate investor sentiment: -Odd lot transactions (small investors trade odd lots and are always wrong) -Put/call ratio (a high ratio indicates the market is oversold, low ratio indicates the market is overbought) -Short interest figures (a large short interest is bullish in the long term) Technical analysts do not evaluate based on fundamentals (earning trends, balance sheet strength, management, etc)