Term
| What is ADRs and What is its purpose? |
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Definition
ADRs are American Depository Receipts.
ADR allows U.S. investors to buy shares of foreign companies. |
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Term
| What is the Top Down Approach? |
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Definition
| An analysis in which a trader finds securities by beginning at a macro level and drilling down to an industry and then to a particular company. |
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Term
| What is the Bottom Up Approach? |
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Definition
| An analysis in which a trader finds securities by beginning at the bottom, namely, individual companies, and then selecting the company that has the best industry group and macro-level fundamentals. |
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Term
| Name the three types of Chart. |
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Definition
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Term
| What is an accumulation phase? |
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Definition
| A period in which prices do not rises or declines meaningfully. Instead, prices move sideways through time.[image] |
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Term
| What is an expansion phase? |
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Definition
| After an accumulation phase, there is an expansion which is a period of increasing prices.[image] |
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Term
| What is a distribution phase? |
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Definition
| After an expansion phase, there is a distribution phase, a period in which share prices start to even out and move side[image]ways instead of rising or falling. |
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Term
| What is a contraction phase? |
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Definition
| A period in which there is a significant decline in sh[image]are prices with lower highs and lower lows. |
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Term
| What are the four phases of a stock price? |
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Definition
| Accumulation, expansion, distribution, and contraction. |
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Term
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Definition
| A rectangle-shaped pattern that illustrates how security prices tend to trade between two levels before breaching a level and rallying or falling.[image] |
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Term
| What is a support level (floor) and a resistance level (ceiling)? |
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Definition
A support level marks the price point at which buyers stepped in and bought shares, p[image]reventing prices from going down.
A resistance level marks the price point at which sellers stepped in and sold shares, preventing prices from going up. |
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Term
| What is a head-and-shoulders pattern? |
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Definition
| A head-and-shoulders pattern is composed of threes, with the middle hill being the tallest and the left and right hills roughly the same height. It is a distribution pattern that marks the end of an uptrend, and is among the most reliable of all chart patterns.[image] |
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Term
| What is a neckline of a head-n-shoulder pattern? |
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Definition
| A neckline is a trendline through the lows of the left shoulder and the right shoulder. A head-n-shoulders pattern isn't complete until a stock breaks below this point, a movement that's usually followed by lower prices.[image] |
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Term
| How does the head-n-shoulders pattern estimate how much a security's price after breaking the neckline? |
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Definition
| You can measure the distance between the head and the neckline and project that downward to estimate how far the stock will fall at a minimum. E.g., if the neckline is priced at $52, and the head was priced at $56, then the difference is $4. So you may expect the price to drop from the neckline by $4, reaching $48. |
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Term
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Definition
| A trade initiated by buying with an expectation to sell at a higher price in the future. |
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Term
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Definition
| A trade initiated by selling first with an expectation to buy the stock back at a lower price. |
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Term
| Should you short trade or long trade stocks when they break below the neckline of a head-n-shoulders pattern? |
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Definition
| You should short stocks as they break below the neckline of a head-and-shoulders pattern. |
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Term
| What is an inverse head-and-shoulders pattern? |
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Definition
| An inverse head-and-shoulders pattern looks exactly like a head-and-shoulders pattern expect it is turned upside down. An inverse head-n-shoulders pattern marks the end of a downtrend. The measuring technique used in the traditional head-and-shoulders pattern applies to an inverted pattern as well.[image] |
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Term
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Definition
| A financial market of a group of securities in which prices are rising or expected to rise. |
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Term
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Definition
| A financial market of a group of securities in which prices are falling or expected to fall. |
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Term
| What is a cup-and-handle pattern? |
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Definition
| A bullish pattern that signals shares are being accumulated and the security is pr[image]eparing for an upward move. Cup-and-handle formulations must be preceded by an uptrend, because they're a continuation formation, a pattern that indicates the continuation of a trend. |
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Term
| What is a technical analysis in trading stocks? |
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Definition
| A technical analysis evaluates securities and forecasts their future movement by analyzing statistics from trading activity, such as Price Movement and Volume. |
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Term
| What is a fundamental analysis in trading stocks? |
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Definition
| A method of evaluating a security in an attempt to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors, such as examining the financial statement and balance sheet of a company. |
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Term
| What are the four primary technical analysis tools? |
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Definition
1. Support and Resistance Line
2. Trend Lines
3. Moving Averages
4. Volume |
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Term
| For a technical analysis, how do you use a support and resistance tool? |
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Definition
| If an index or stock is moving up and down between a consistent low and a consistent high, it is said to be "range-bound." Drawing horizontal lines at these price levels can help you develop a sense of where the selling pressure overcomes buying pressure, at support, and buying pressure overcomes selling pressure at resistance. You can use these price levels to identify a trend as well as possible ent[image]ry and exit points. |
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Term
| For a technical analysis, how do you use trend lines? |
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Definition
| A simple trend line can help you assess whether an index or stock has been bullish or bearish. To determine a bullish trend, draw a line connecting price lows over the period in question. If a stock price is experiencing higher lows, that can indicate a bullish trend. To identify a possible bearish trend, connect price highs with a drawn line. A stock price that is experiencing lower highs points to a bearish trend. Drawing one or both of these lines to create a trend channel can help you evaluate both the strength and dura[image]tion of a market trend. |
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Term
| For a technical analysis, how do you use moving averages? |
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Definition
| Moving averages reflect the recent price history of an index or stock. A simple moving average is the sum of the prices over a period of time divided by that time period. For example, a "20 day Moving Average" is the sum of the prices over 20 days divided by 20. Moving averages show you how the current price compares to an average price over an index or stock's history. An index or stock with a current price above its moving average is performing better than it has during the period used to calculate the moving average. Typical moving average time frames are 20, 50, and 200 days, which approximate one month, 10 weeks and 40 weeks, respectively. Some traders look at "crossovers" (when one moving average "crosses" over another). When a moving average with a shorter time frame crosses over and above a moving average with a longer time frame, that's a bullish indicator. It reflects that the stock is doing better in the shorter term than its average performance during the longer time perio[image]d. |
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Term
| For a technical analysis, how do you use volume? |
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Definition
| Looking at volume in combination with price activity can indicate how strongly investors feel about a stock's current pricing. Larger volume indicates greater conviction from the market. Lower volume may indicate less conviction. When volume exceeds the current moving averages, support for the price action may be growin[image]g. |
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Term
| What are the four primary fundamental analysis tools? |
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Definition
1. Earning growth
2. Revenue/Sales growth
3. Valuation
4. Financial strength |
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Term
| For a fundamental analysis, how do you use earnings growth? |
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Definition
When you own stock, you're participating in the growth of the underlying business, as measured by earnings per share (EPS) growth. Earnings growth can be measured over different time frames, such as year-over-year (YOY) or as a five-year average.
Using earnings growth as a screening criterion makes it easy to filter out those companies with declining earnings or negative earnings growth. |
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Term
| For a fundamental analysis, how do you use revenue growth? |
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Definition
| In recent years, many companies have grown earnings by cutting costs. However, costs can only be cut so much, and at some point companies have to grow sales in order to grow future earnings. This is why it's important to consider both earnings growth and revenue growth when using fundamental analysis filters. |
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Term
| For a fundamental analysis, how do you use valuation? |
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Definition
| Valuation measures, such as the price-earnings ratio or price–book value ratio, may help you avoid overpriced stocks. |
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Term
| For a fundamental analysis, how do you use financial strength? |
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Definition
| One of the primary measures of a company's financial strength is the debt-equity ratio. This measures the percentage of the company's total capitalization that's owed to others (i.e., debt) versus shareholders' equity—similar, for example, to a homeowner's level of equity compared to the amount of his or her mortgage. Lower is generally better, and a reasonable rule of thumb is to look for companies with a debt-equity ratio of less than 50%. |
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Term
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Definition
| Catalysts are fundamental events like mergers, acquisitions, new products, and earnings release dates that affect short-term movement and spur the market to correctly value a company's shares. |
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Term
| What are internal catalysts? |
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Definition
| Events that a company has direct control over are internal catalysts. They come in the form of new services or products or new management. |
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Term
| What are external catalysts? |
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Definition
| External catalysts include such events as consolidation in an industry (when a company is bought out, its competitors are often assigned higher valuations because they're seen as potential targets) or changes in commodity prices (e.g., oil or natural gas prices). |
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Term
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Definition
| Companies that typically trade at premiums to the overall market (as defined by price to book ratios or price to earnings ratios) are growth stocks. They tend to be in industries that experience high growth rates, like technology and healthcare. |
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Term
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Definition
| Companies that typically trade at discounts to the overall market ( as defined by price to book ratios or price to earnings ratios) are value stocks. They tend to be in the financial sector and the consumer staples sector (e.g., companies in the beverage or food industries are considered to be part of the consumer staples industry.) |
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Term
| What's the importance of growth and value stocks? |
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Definition
| Value and growth stocks exchange leadership roles. A reliable way to know how to trade for growth or value is by using technical analysis. If matters change, move your chips to the other side of the table. |
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Term
| State and describe the three fiscal triangles. |
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Definition
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Term
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Definition
| A breakaway gap occurs on heavy volume and indicates seismic shifts are occurring in the security. Often the percentage [image]move up or down is significant (more than 5% in a single day), and the volume is at least double the average daily volume. Breakaway gaps are preceded by congestion periods. If you see a breakaway gap, take note, and wait for confirmation. |
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Term
| What is a continuation gap? |
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Definition
| A continuation gap crops up in the midst of an uptrend or downtrend. Look to add or[image] enter a position on a continuation gap in the direction of the gap. For example, buy if the gap is up and short if the gap is down. Place a protective stop loss within the gap. |
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Term
| What is an exhaustion gap? |
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Definition
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Term
| What is a Hammer in a Candlestick pattern? |
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Definition
| A Hammer represents the bottom of a trend. It looks identical to a hanging man and occurs at the end of a downtrend. Hammers signal that after the price of the security opened on the market, sellers drove it down. By the end of the day, buyers had recouped much of the losses to end the day near or at the hig[image]h. |
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Term
| What is a Hanging Man in a Candlestick pattern? |
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Definition
A hanging man looks identical to the hammer, but occurs at the end of an uptrend rather than a downtrend.
It crops up on heavy volume and is followed by price action confirming the top. |
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Term
| What are bullish engulfing patterns? |
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Definition
| Bullish engulfing patterns mark the ending of a downtrend. It occurs when a candlestick bar opens lower than the previous candlestick's close and closes higher than the previous candlestick's open. A candlestick bar that has small real body is followed by a candlestick bar whose body engulfs the previous day's body.[image] |
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Term
| What are bearish engulfing patterns? |
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Definition
| Bearish engulfing patterns ocuur at the ending of an uptrend and mark important reversals. First candlestick has a small real body. Second candlestick opens higher than the first bar's close and closes lower than the first bar's open. [image] |
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Term
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Definition
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Term
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Definition
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Term
| How to measure the strength of trends with trendlines? |
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Definition
1. A trendline must touch three different price points to be valid.
2. The more times a trendline's touched, the stronger the support or resistance of that line.
3. The longer the trendline (measured by time), the more meaningful it is. |
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Term
| How to use Uptrend Lines: Support for the stubborn bulls? |
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Definition
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Term
| What's the significance of a downtrend? |
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Definition
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Term
| What to do when faced with data error? |
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Definition
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Term
| What to do when faced with data error? |
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Definition
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