Technical Talk

Ever wonder what those terms mean?

Support - Over time, a stock tends to become attractive to investors at specific prices. When a stock starts to decline to one of these prices, investors tend to come in and purchase the stock, thereby halting its decline. When more buyers come in and outnumber the sellers, the price of the stock tends to go up. This point at which the buyers start to come in and the sellers are becoming outnumbered is called "support."

Resistance - When stocks go up, they tend to reach a point where investors think they are overvalued and sellers of the stock outnumber buyers. This causes the price of the stock to stop dead in its tracks. It can't go higher because there are no buyers. This point is called resistance.

Head and Shoulders - The pattern is typically characterized by one intermediate top (left shoulder), followed by a second top higher than the previous top (head), and a third rally which fails to exceed the head (right shoulder). The neckline is drawn connecting the reaction lows (support). The pattern is completed when prices break below the neckline and the sell signal is given.

Reverse Head and Shoulders - This is the same pattern as a head and shoulders excepted it's turned upside down and indicates a trend change from down to up. A buy signal is given when prices carry up through the neckline.

Double Top - This is formed when a stock advances to a certain price level only to retreat from that level, and then rally again back to that level. The up moves are accompanied by high volume and the recession from the top comes on receding volume.

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