FocalEquity » Glossary

Short Squeeze

Scott Myles — Mon, 01 Sep 2008 23:47:28 +0000

Occurs when a heavily shorted stock receives buying interest. This causes short-sellers to cover their positions by buying back the stock and pushing up the price. This, in turn, causes more short-sellers to cover, pushing the price up even higher. In essence, excess demand and a lack of supply create an environment for a stock to make a large advance in a short amount of time. Short squeezes are most common in smaller cap stocks with a small float.

WV Pattern

Scott Myles — Fri, 06 Jun 2008 14:31:33 +0000

The most fundamental bullish pattern in technical analysis. The pattern looks like a capital letter W, followed by a smaller capital V that takes the price to a new high.

The strongest and most reliable WV patterns have the right bottom of the W somewhat lower than the left bottom. The new low suckers in more amateur shorts, creating a stronger move higher when they scramble to cover.
A failed WV pattern often results in a sell-off. When the bulls fail to complete the bullish pattern, it often marks a shift in control from the bulls to the bears.

Volume

Scott Myles — Fri, 06 Jun 2008 14:30:09 +0000

The number of shares that are traded for a given market or stock within a specified time period.

Volatility

Scott Myles — Fri, 06 Jun 2008 14:29:54 +0000

A measure of a stock’s tendency to move up and down in price.

Turn Date

Scott Myles — Fri, 06 Jun 2008 14:29:41 +0000

The approximate time at which there is a change in trend.

Trendline

Scott Myles — Fri, 06 Jun 2008 14:29:25 +0000

A straight line that connects two or more price points and extends into the future. Trendlines may identify areas of support and resistance. When a trendline is broken, it may indicate a change in trend, or at least a slowing of the current trend.

Some trendlines are more reliable than others.
- Number of touches: the more touch points, the better; 3 touches forms a “major trend line”.
- Spacing of touch points: the more distant from each other, the better
- Angle: steep lines are less reliable; a break of a steep trendline is often considered a violation of time, not of price, and therefore should not be viewed as a change in trend.
Trend lines follow reason, not strict rules. Traders may ignore certain price spikes where the market has momentarily overreacted. A trendline may also be valid even if touches do not match up perfectly.

Topping Candle

Scott Myles — Fri, 06 Jun 2008 14:28:42 +0000

A price pattern in candlestick charting that occurs when a stock trades significantly higher than its opening, but falls back to close either below or close to its opening price.

The most reliable topping candles have long tails and close in the lower ¼ of the candle.
Topping candles occur after a stock has been rising, possibly suggesting the market is attempting to determine a top.

Technical Analysis

Scott Myles — Fri, 06 Jun 2008 14:28:22 +0000

The forecasting of future financial price movements based on an examination of past market activity, primarily price and volume. Technical analysts use charts and other tools to identify patterns and predict future price movement. They do not perform fundamental analysis.

StockTock uses technical analysis combined with market psychology to predict future price movement.

Swing Trading

Scott Myles — Fri, 06 Jun 2008 14:27:26 +0000

A style of trading that attempts to capture gains in a stock within one day to a week. This is mainly used by at-home and day traders. Large institutions trade in sizes too big to move in and out of stocks quickly. The individual trader is able to exploit the short-term stock movements without the competition of major traders. Swing traders use technical analysis to find stocks with short-term price momentum. Swing traders are interested in a stock’s price trend and patterns, not its fundamentals.

StockTock employs a Swing Trading strategy.

Stop Loss

Scott Myles — Fri, 06 Jun 2008 14:27:04 +0000

The risk management technique in which the trade is liquidated to halt any further decline in value. A stop-loss order is placed with a broker.