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Bar: A graphical representation of an instruments movement that usually contains the open, high, low and closing prices for a set period of time.
For example, if a technical trader is working with daily data, one bar is the set of quotes for one day. In the case of one-minute data, it is the price data for one minute. Also, if the data is displayed using a candlestick chart, one bar equals one candlestick or in the case of bar charts, one bar is equal to one bar.
Bar Chart: A style of chart used by some technical analysts, the top of the vertical line indicates the highest price an instrument traded at during the day, and the bottom represents the lowest price. The closing price is displayed on the right side of the bar, and the opening price is shown on the left side of the bar. A single bar like the one below represents one day of trading.
These are the most popular type of chart used in technical analysis. The visual representation of price activity over a given period of time is used to spot trends and patterns.
Basing: A period in which the market price has very little or no trend. The resulting price pattern is a flat line.
Basing is a common occurrence after the market has been in a lengthy decline or has increased by a large amount. In other words, the market is taking a break. Some markets can form a base that lasts for severals years before the trend is reversed.
Bearish Belt Hold: A candlestick pattern that forms during an upward trend. This is what happens in the pattern: following a stretch of bullish trades, a bearish or black candlestick occurs; the opening price, which becomes the high for the day, is higher than the close of the previous day; the stock price declines throughout the day, resulting in a long black candlestick with a short lower shadow and no upper shadow.
This pattern often signals a reverse in investor sentiment from bullish to bearish. However, the bearish belt hold is not considered very reliable as it occurs frequently and is often incorrect in predicting future share prices. As with any other candlestick charting method, more than two days of trading should be considered when making predictions about trends.
Bearish Engulfing Pattern A chart pattern that consists of a small white candlestick with short shadows or tails followed by a large black candlestick that eclipses or "engulfs" the small white one.
As implied by its name, a bearish engulfing pattern may provide an indication of a future bearish trend. This type of pattern usually accompanies an uptrend in a security, possibly signaling a peak or slowdown in its advancement. However, whenever a trader analyzes any candlestick pattern, it's important for him or her, before making any decisions, to consider the prices of the days that precede and follow the formation of the pattern.
Bearish Harami A trend indicated by a large candlestick followed by a much smaller candlestick whose body is located within the vertical range of the larger candle's body. Such a pattern is an indication that the previous upward trend is coming to an end.
A bearish harami may be formed from a combination of a large white or black candlestick, and a smaller white or black candlestick. The smaller the second candlestick, the more likely the reversal. It is thought to be a strong sign that a trend is ending when a large white candle stick is followed by a small black candlestick.
Blow-Off Top A steep and rapid increase in price followed by a steep and rapid drop in price.
The rapid increase can be a result of either actual news or simply a wild rumor.
Blowoff A term in technical analysis that refers to a sharp price increase that comes after a long period of price appreciation, and is followed by a fall in the price. A blowoff is seen as a rally's last breath and is a highly bearish sign.
This large and dramatic price movement is generally seen at the peak of a market. The idea behind the bearishness of a blowoff is that it signals the activity of the most irrational and overly exuberant market participants, who, wanting to take part in the rally, momentarily push up the already-overvalued market.
Bollinger Band A band plotted two standard deviations away from a simple moving average.
In this example of Bollinger bands, the price of the stock is banded by an upper and lower band along with a 21-day simple moving average.
Because standard deviation is a measure of volatility, Bollinger bands adjust themselves to the market conditions. When the markets become more volatile, the bands widen (move further away from the average), and during less volatile periods, the bands contract (move closer to the average). The tightening of the bands is often used by technical traders as an early indication that the volatility is about to increase sharply.
This is one of the most popular technical analysis techniques. The closer the prices move to the upper band, the more overbought the market, and the closer the prices move to the lower band, the more oversold the market.
Box Size In the context of Point & Figure Charts, the box size is the minimum price change that must occur for a given period before a mark (an X or an O) is added to the chart.
You can filter out smaller price movements by increasing the box size
Breadth Indicator A specific type of indicator that uses advancing and declining issues to determine the amount of participation in the movement of the market.
There are several different types of breadth indicators used by technical analysts.
Breadth of Market Theory A technical analysis theory that predicts the strength of the market according to the number of stocks that advance or decline in a particular trading day.
Breakaway Gap A term used in technical analysis. A breakaway gap represents a gap in the movement of the instruments price supported by levels of high volume.
Breakdown A price movement through an identified level of support, which is usually followed by heavy volume and sharp declines. Technical traders will short sell the underlying asset when the price of the security breaks below a support level because it is a clear indication that the bears are in control and that additional selling pressure is likely to follow.
Technical tools such as moving averages, trendlines and chart patterns are the most common methods for technical traders to identify strong areas of support. The chart above shows that a trader will enter into a short position when the price breaks below an area of support (the thick dark line), which has been identified by using a head and shoulders chart pattern.
A breakdown is the bearish counterpart of a breakout.
Breakout A price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility. Traders will buy the underlying asset when the price breaks above a level of resistance and sell when it breaks below support.
In practice, a breakout is most commonly used to refer to a situation where the price breaks above a level of resistance and heads higher, rather than breaking below a level of support and heading lower. Once a resistance level is broken, it is regarded as the next level of support when the asset experiences a pullback Most traders use chart patterns and other technical tools such as trendlines to identify possible candidates that are likely to break through a support/resistance level.
A breakout is the bullish counterpart to a breakdown.
Breakout Trader A type of trader who uses technical analysis to find potential trading opportunities, identifying situations where the price of an asset is likely to experience a substantial movement over a short period of time. Breakout traders generally look for key levels of support and resistance and will place transactions when the asset's price passes through these levels. Long positions are taken when the price of an asset breaks through a level of resistance, and short positions are taken when the price breaks below a level of support.
Many breakout traders find trading opportunities by identifying chart patterns such as channels, ascending triangles, descending triangles, head and shoulders, etc. These types of traders will generally set up target prices to be equal to the distance between support and resistance levels.
Bullish Belt Hold A trend in candlestick charting that occurs during a downward movement. After a stretch of bearish candlesticks, a bullish or white candlestick forms. The opening price, which becomes the low for the day, is significantly lower then the closing price. This results in a long white candlestick with a short upper shadow and no lower shadow.
The bullish belt hold often signals a reverse in investor sentiment from bearish to bullish. Since this trend occurs frequently but is often incorrect in predicting future share prices, it is rarely perceived to be useful. As with any other candlestick charting patterns, more than just two days of trading should be considered when making predictions about trends.
Bullish Engulfing Pattern A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses or "engulfs" the previous day's candlestick. The shadows or tails of the small candlestick are short, which enables the body of the large candlestick to cover the entire candlestick from the previous day.
As implied in its name, this trend suggests that the bulls have taken control of a security’s price movement from the bears. This type of pattern usually accompanies a declining trend in an instrument, suggesting that a low or end to a security's decline has occurred. However, as usual in candlestick analysis, the trader must take the preceding and following days' prices into account before making any decisions regarding the instrument.
Bullish Harami A candlestick chart pattern in which a large candlestick is followed by a smaller candlestick whose body is located within the vertical range of the larger body. In terms of candlestick colors, the bullish harami is a downtrend of negative-colored (black) candlesticks engulfing a small positive (white) candlestick, giving a sign of a reversal of the downward trend.
Because the bullish harami indicates that the falling trend (bearish trend) may be reversing, it signals that it's a good time to enter into a long position. The smaller the second (white) candlestick, the more likely the reversal.
Bullish Homing Pigeon A trend indicated by a large candlestick followed by a much smaller candlestick whose body is located within the vertical range of the larger candle's body. In both candlesticks, the instruments price has to have closed down from the opening price. This pattern may indicate that there is a weakening of the current downward trend.
If a bullish homing pigeon trend is seen in a chart it may be a good for traders to exit short positions and begin to enter into long positions. The worse the downward movement in the instrument, the more likely a closing of a short position should be taken by a trader.
Buy Weakness A proactive trading strategy in which a trader takes profits by closing out of a short position or buying into a long position. This strategy is used when the price of the asset being traded is still falling but is expected to reverse and move against the trader. This is the opposite of "selling into strength".
Many traders will wait for confirmation of a change in price movement before reacting. However, by the time a reversal is confirmed, 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 greater room for error. As the saying goes, "missed money is better than lost money".
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