Breakout: A sharp rise in a symbol's price above a resistance level or a fall below a support level. A breakout may also be interpreted as a sharp rise in price above a previous high or a sharp fall below a previous low. Many times when a breakout occurs, it signifies a continuance of price action above a resistance level or below a support level.
Commodity: A bulk good such as grains, metals, oil, and foods actively traded on a commodities exchange such as the Chicago Mercantile Exchange (CME) or the Chicago Board of Trade (CBOT).
Consolidation: A term that refers to a symbol, commodity, or market that has entered a period in which its price range has decreased, or the difference between the high and the low has decreased. When a symbol consolidates over a period of time, its chances of breaking out increase significantly. Usually the breakout will be in the direction of the most recent uptrend or downtrend.
Divergence: A divergence occurs when the action of a market, symbol, or commodity differs from the calculation of a technical indicator on the same market, symbol, or commodity. For example, if you were using the Relative Strength Index (RSI) and the prices of a symbol were continuing to make new highs, but the RSI was failing to make new highs, this would be a divergence. When this occurs, a symbol's price will usually correct and move in the direction of the indicator.
Overbought: This term describes a market, symbol, or commodity that has recently experienced an unexpectedly large price increase. As a result, there are few buyers remaining to push the price higher, making it vulnerable to a price correction or a decrease.
Oversold: This term describes a market, symbol, or commodity that has recently experienced a large price decrease. As a result, there are virtually no sellers remaining that are willing to sell at such a low price, thus making it due for a price increase.
Range: The low price subtracted from the high price of a symbol: (High – Low).
Reversal: The change in price direction of a symbol, commodity, or market. This is a common term in technical analysis that signifies a change in trend.
Symbol: Actual ownership in a corporation (stock), a creditor relationship with the government or a corporation (bond), or a right to ownership such as an Option, Subscription Right, or Subscription Warrant.
Support and Resistance: The Support and Resistance levels of a symbol are based on the economic principles of supply and demand. Support levels occur when a symbol reaches price levels that it cannot fall below. It cannot fall below these price levels (Support line) because there are no sellers willing to sell the symbol below these price levels. Resistance levels occur when a symbol reaches price levels that it cannot rise above. It cannot rise above these price levels (Resistance line) because there are no buyers willing to buy the symbol above these price levels. Support and Resistance levels constantly change because investors' expectations are constantly changing. When prices successfully penetrate Resistance levels, they become the new Support levels. Conversely, when prices successfully drop below Support levels, they become the new Resistance levels. Prices tend to stay within Support and Resistance levels unless there is a drastic change in expectations. This helps investors predict future market action. Usually a drastic change in expectations occurs through positive or negative news stories.
Trend: Long-term price or volume movements in a consistent direction, either up, down, or sideways. Trends characterize commodities, markets, and securities.
Volatility: The range of a market, symbol, or commodity. Volatility is a measure of the rise or fall of prices within a short period of time. A symbol with a large difference between its high and low prices for five days would be considered volatile.