Technicals Glossary

Process by which, over a period of time, a large or excess supply of stock or futures contracts is absorbed by increasing demand from buyers. Generally, there is little price action until the sellers have been exhausted. Then buyers dominate and price tends to rise.

The Accumulation/Distribution is a momentum indicator that associates changes in price and volume. The indicator is based on the premise that the more volume that accompanies a price move, the more significant the price move. Accumulation/Distribution attempts to confirm changes in prices by comparing the volume associated with prices. When the Accumulation/Distribution moves up, it shows that the security is being accumulated, as most of the volume is associated with upward price movement. When the indicator moves down, it shows that the security is being distributed, as most of the volume is associated with downward price movement. Divergences between the Accumulation/Distribution and the security�s price imply a change is imminent. When a divergence does occur, prices usually change to confirm the accumulation/distribution. For example, if the indicator is moving up and the security�s price is going down, prices will probably reverse. If the days price change is positive then the difference in the daily high and low price is added to the total, and conversely if the daily change is negative then the daily range is subtracted from the total.

The number of stocks or bonds or commodities which have advanced in a given time period compared to the number which have declined. The difference (breadth) is considered important in gauging the strength or weakness of the market. Daily observations are the most common.

Each day's declining issues are subtracted from the day's advancing issues. The difference is added to (subtracted from if negative) a running total or sum.

(A/D) This is a measure of the number of stocks that have advanced in price and the number that have declined in price within a given time span. The A/D is generally expressed as a ratio and can help indicate the general direction of the market; when a higher number of stocks advance rather than decline on a single trading day, the market is thought to be bullish. The A/D will function best as a confirming indicator and it is often used with other types of analysis as a guide to the trend of the overall market. It is also used occasionally for specific stock/industry groups. The most common way to display A/D data is with a chart showing the cumulative difference between the advances and the declines on the NYSE. The period can be one week, one month, or any other common time frame but since it is best used to identify new or developing trends, it must be relative to the positions in your portfolio. Compare the A/D chart with that of the DJIA. If the Dow is moving higher but the A/D line is flat or dropping, that is a negative signal and may indicate a future slump. Watch for new highs and lows on the A/D chart. Near market peaks, the A/D line will generally top-out and begin a gradual decline before the overall market. As with all technical indicators, make sure that it confirms other signals.

The Directional Movement Index provides an indication of how much a stock is trending. Since stocks tend to only trend 30% of the time and move sideways the remainder of the time this indicator can prove very useful. There are three lines that make up this indicator. The +DI (Directional Indicator), the � DI (Directional Indicator), and the ADX (Average Directional Indicator). The +DI line measures upward movement, the -DI meansures downward movement. The ADX measures the strength of the prevailing trend. For example: If the +DI crosses over the -DI, or the -DI crosses over the +DI the ADX MUST be rising in order to confirm the signal.

The point of intersection of two trendlines. A new trend may develop as prices approach the intersection.

Also known as a trading index (TRIN)= (number of advancing issues)/ (number of declining issues) (Total up volume )/ (total down volume). An advance/decline market indicator. Less than 1.0 indicates bullish demand, while above 1.0 is bearish. The index often is smoothed with a simple moving average.

A chart pattern containing a series of lows, each successively higher than the last, and a series of highs that are at approximately the same level. It is considered a bullish formation when volume increases on the ascending legs. When a breakout through the level of the highs is made, the pattern is completed.

A simple moving average applied to the tick volume based on a comparison of the current and previous period's closes.