Technical Analysis & Chart Patterns Flashcards

A 'three drives' harmonic pattern is considered complete when:

Answer: The third drive reaches a Fibonacci extension of the second drive

The three drives pattern completes when the third drive hits a Fibonacci extension (typically 127.2% or 161.8%) of the second drive, signaling exhaustion.

What distinguishes a 'broadening top' pattern from most other chart formations?

Answer: It has expanding price swings with diverging trendlines

A broadening top is unique because the trendlines diverge as volatility expands, creating a megaphone shape that signals instability.

The Relative Strength Index (RSI) was developed by J. Welles Wilder with a default period of:

Answer: 14 periods

Wilder originally designed RSI with a 14-period lookback, which remains the standard default across most charting platforms.

In the Dow Theory, a 'secondary trend' (reaction) typically lasts:

Answer: Three weeks to three months

Dow Theory defines secondary trends as corrections within the primary trend, typically lasting three weeks to three months.

A 'rounding bottom' (saucer) pattern is most associated with which type of reversal?

Answer: A slow, gradual reversal where selling pressure diminishes over time

A rounding bottom forms over an extended period as sellers gradually give way to buyers, producing a smooth curved base rather than a sharp reversal.

Which concept does the 'advance-decline line' measure in market breadth analysis?

Answer: The cumulative difference between advancing and declining issues

The advance-decline line is a running total of advancing stocks minus declining stocks, used to gauge the breadth and health of a market move.

When a chart shows a 'death cross,' which event has just occurred?

Answer: The 50-day moving average crosses below the 200-day moving average

A death cross occurs when the 50-day SMA crosses below the 200-day SMA, widely viewed as a long-term bearish signal.