Category Archives: Charts and Patterns

Double Bottom

Double Bottoms are reversal patterns and often seem to be one of the most common (together with double top patterns) patterns for currency trading. Double Bottoms patterns are identified by two consecutive low prices of the same depth with a moderate pull back up in between (neckline peak).

Cup With Handle

A cup-and-handle chart pattern resembles a cup of tea. These are bullish continuation patterns where the growth has paused. momentarily, it trades down and then continues its upward pattern. This pattern must always be at least 5 weeks long and can last up to a year.

Body of a candlestick

For a candlestick chart, the body or real body is the wide or colored part of a candle that represents the range between the opening and the closing prices over a specific time period (minute, hour, day, week or other). They are the most basic building block for candlestick charts.

Candlesticks

A point on a candle stick chart representing a specific time period (a day, an hour, a minute, etc) in which the underlying stock price has moved. Candlesticks will have a body and usually two wicks – one on each end. For a white (could also be green) candlestick, the bottom of the body represents the opening price and the top of the body represents the closing price. For red candlesticks, it is just the other way around. The top and bottom tips of each wick are the day’s highest and lowest price respectively.

Resistance Line

A point or range in a chart that caps an increase in the price of a stock or index over a period of time. An area of resistance, resistance line or resistance level indicates that the stock or index is finding it difficult to break through it, and may head lower shortly. The more times that the stock or index tries unsuccessfully to break through the resistance line, the stronger that area of price resistance becomes.

Dead Cat Bounce, Inverted

An inverted dead-cat bounce is quite the opposite of the dead-cat bounce. A quick look is if a trader owns a stock following a quick and large (5-20%) gain there is normally a gap up. If you sell on the next day after the gap up day, thus unlocking profits its because prices normally start falling before beginning a new move upward (Bulkowski, 2005).

Dead Cat Bounce

A trading term called a dead cat bounce is used to when a stock is in a severe decline and has a sharp bounce off the lows. It occurs due to the huge amount of short interest in the market. Once the supply and demand has become unbalanced, any type of bear market rally will create a massive short covering which will lead to a swift price move up. This bounce will be short lived and followed up by heavy selling which will break the prior price low.