Breakout: A price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility, is a ‘breakout’. Traders will buy the underlying asset when the price breaks above a level of resistance and sell when it breaks below support. A breakout is the bullish counterpart to a breakdown.

Climax: Following a protracted period of selling or buying, a point wherein market trends are retarded or discontinued. At a selling climax, the market is characterized by a trend reversal whereby the market begins to buy stocks and prices rise. For a buying climax, the opposite occurs, and the market begins to sell, resulting in lower prices. The climax is merely the highest point of selling or buying and can be followed by many trend reversals Distribution: Distribution is when trading volume is higher than that of the previous day without any price appreciation.

Double Top: A term used in technical analysis to describe the rise of a stock, a drop, another rise to the same level as the original rise, and fi nally another drop.
Double Bottom: A charting pattern used in technical analysis. It describes the drop of a stock (or index), a rebound, another drop to the same (or similar) level as the original drop, and fi nally another rebound.

Downtrend: A Downtrend describes the price movement of a fi nancial asset when the overall direction is downward. A formal downtrend occurs when each successive peak and trough is lower than the ones found earlier in the trend.

Exhaustion: Situation in which a majority of participants trading in the same asset are either long or short, leaving few investors to take the other side of the transaction when participants wish to close their positions. Exhaustion signals the reversal of the current trend because it illustrates excess levels of supply or demand.

Long: The buying of a security such as a stock, commodity, or currency, with the expectation that the asset will rise in value is called ‘Long’.

Overbought: An asset that has experienced sharp upward movements over a very short period of time is often deemed to be overbought. Determining the degree in which an asset
is overbought is very subjective and can differ between investors.

Oversold: Assets that have experienced sharp declines over a brief period of time are often deemed to be oversold. Determining the degree to which an asset is oversold is very subjective and could easily differ between investors.

Peak: The highest point between the end of an economic expansion and the start of a contraction in a business cycle indicates the ‘Peak’. The peak of the cycle refers to the last month before several key economic indicators, such as employment and new housing starts, begin to fall. It is at this point that real GDP spending in an economy is its highest level.

Recession: A significant decline in activity spread across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP).

Recession is a normal (albeit unpleasant) part of the business cycle. A recession generally lasts from six to 18 months. Interest rates usually fall in recessionary times to stimulate the economy by offering cheap rates at which to borrow money.

Resistance: The price at which a stock or market can trade, but not exceed, for a certain period of time. This is often referred to as “resistance level”. The stock or market stops rising because sellers start to outnumber buyers.

Support: ‘Support’ is the price level which historically, a stock has had difficulty falling below. It is thought of as the level at which a lot of buyers tend to enter the stock.

Trough: The stage of the economy’s business cycle that marks the end of a period of declining business activity and the transition to expansion is the Trough.