PDSnet Glossary

Term

Categories

Introductory Technical Fundamental Economics Opinion Sectors International Regulatory Other Markets

Versions

Name	synonyms = 1, variations = 2, abbreviations = 3

Publish: (0 = no, 1 = yes)

Definition

<p style="text-align: justify;">The study of <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">technical analysis</span> can be divided into three primary areas - Formation Analysis, <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">Line charts</span> and <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">Wave and Cycle Theories</span>. Formation analysis is the study of the various <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">patterns</span> which come up again and again in <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">chart</span>s. These patterns are well-known to <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">investors</span> who use charts. Most formations are patterns which come up between <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">support</span> and <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">resistance</span> lines or in temporary <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">sideways market</span>s. Examples include <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">double top</span>s and bottoms, <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">head-and-shoulders</span>, <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">cup-and-handle</span>, <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">flag</span>s, <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">pennant</span>s, <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">triangle</span>s and many others. As a <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">private investor</span> you need to familiarise yourself with the various formations and how to interpret them. For examples of formations and their interpretation, refer to the module on formations in the course material.</p>