Technical Terms For The Series 7 Exam

Upward Trendlines: An upward trendline is characterized by a series of higher highs and a series of higher lows. A chartist would draw a line connecting the series of higher lows to confirm the trend and the trendline should provide some support to the stock price.

Downward Trendlines: A downward trendline is characterized by a series of lower highs and a series of lower lows. A chartist would draw a line connecting the series of lower highs to confirm the downward trend and the trendline should provide some resistance to the stock price.

Reversals: A reversal indicates a significant change in the price action of the stock. A bullish reversal indicates the end of a downward trend and the beginning of a new upward trend. A bearish reversal indicates the end of an upward trend and the beginning of a new downward trend. One of the most significant reversal patterns is the head and shoulders formation. A head and shoulders top is a bearish reversal of an up trend, while a head and shoulders bottom is a bullish reversal of a downtrend.

Consolidation: A consolidation pattern is characterized by a horizontal movement in the stock price. Buyers and sellers are attracted to the market and are willing to trade the stock at almost the same prices.

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