BASE / BOTTOM An area of price consolidation that is formed when selling is exhausted and new buyers begin ACCUMULATING a stock, usually setting the stage for an upward advance.

CATAPULT A strong, sharp price move which takes the price of stock above its base (or recent highs), or below its top (or recent lows). A CATAPULT, depending on its direction, is the same as an upside or DOWNSIDE BREAKOUT.

CHANNEL A set of parallel lines (upward or downward) between which a stock will trade. The bottom line acts as SUPPORT while the upper line acts as RESISTANCE. Stocks tend to stay within these CHANNELS once they are formed and therefore become excellent for trading, buying at the lower line and selling at the upper line.

CONGESTION A temporary halt in the direction of the trend of a stock represented by lateral (neutral) movement which is caused by reading a previous SUPPLY or SUPPORT LEVEL. See also CONSOLIDATION.

CONSECUTIVE TRANSACTION TAPE A record, in chronological order, of all trades on the New York or American Stock Exchange (Not the composite trades. Which include other Market) for each stock, or, the “TICKER TAPE.”

CONSOLIDATION An area on a chart represented by lateral price movement. Generally considered NEUTRAL when it occurs and leading to UPWARD movement if more buyers are in presence than sellers, or DOWNWARD if the sellers prevail.

CORRECTION A reversal, or pullback in price of a stock, following a BREAKOUT. Pullbacks, or corrections of up to 50% of a stock’s price move are considered “normal” in Technical Analysis.

COUNT A measure of the width of a BASE or TOP on a P&F chart to predict a price objective.

DISTRIBUTION A predominance of sellers and lack of buyers. Shares of a stock are said to be passing from “strong” hands (sellers), usually leading to downside movement in the price of a stock.

DOWNSIDE BREAKOUT A decline in the price of a stock below its most recent low, usually leading to lower prices and considered a “sell” signal.

DOWNTREND A series of lower highs and lower lows in the price of a stock, meaning the overall direction is DOWN.

DOWNTRENDLINE A descending line drawn by connecting one high with a subsequent lower high, or two descending tops.

FALSE UPSIDE BREAKOUT A rise in price of a stock above its most recent high, followed immediately buy a pullback in price below that same high. (False “BUY” sign.)

ONE POINT REVERSAL CHART A P&F chart which changes direction (i.e., to UP from DOWN) when a stock’s price changes by one P&F point.

PENNANT A formation of descending highs and ascending lows resembling your high school football pennant. This pattern enables one to draw both an UPTRENDLINE and a DOWNTRENDLINE, actually having two directions. A stock can be graded NEUTRAL when this formation occurs, however, the direction of the price will usually follow strongly of the BREAKOUT.

POINT & FIGURE CHART A graphic display of supply and demand using “X’s” to chart consecutive, intra-day price changes of $1.00 or more (or $.50 depending on scale used) for stock price. This is the oldest known method of charting.

P&F POINT Price entries which occur on whole numbers (i.e., 25, 26 if using a 1/2 point scale) to construct a P&F Chart.

PRIMARY CHART A P&F chart which records entries that occur when the last digit of the stock’s price ends with a 0 or 5, such as 50, 55, 60 etc.

PULLBACK see CORRECTION

RESISTANCE A SUPPLY LEVEL where a stock’s price can be expected to halt based on a “supply” of stock held by previous buyers at that level. Also, an area on a chart where a price rise has been consistently halted either due toss-ups” or a psychological barrier (such as 50, 100, 150 etc.)

STOP A point at which you are going to sell your stock, should it reach that level.

SUPPLY LEVEL A price level above the current price of a stock where additional selling can be anticipated should the current price rise to this level. The buyers who previously purchased at this higher level (and did not sell when the stock fell) will probably be waiting there with their sell orders to “get out even.” (see also RESISTANCE.)

SUPPORT LEVEL A price level below the current price of a stock where additional buying can be anticipated should the current price decline to this level. The same buyers, or unfulfilled buyers will be present again when the stock falls to this level.

TECHNICAL ANALYSIS An approach to determine the direction of the stock market based on the study of charts and indicators.

THREE POINT REVERSAL CHART A P&F chart which requires a change of three P&F points in order to change direction from UP to DOWN or vice-versa.

TOP An area of price consolidation that is formed when buying is exhausted and sellers begin DISTRIBUTING a stock, usually setting the stage for a downward move.

UPSIDE BREAKOUT A rise in the price of a stock above its most recent high. Generally regarded as a “BUY” signal.

UPTREND A series of higher highs and higher lows in the price of a stock, meaning the overall direction is UP.

UPTRENDLINE An ascending line drawn by connecting one low with a subsequent higher low, or two ascending bottoms.

WEDGE Consists of a horizontal line with a corresponding Up or DOWNTRENDLINE. The horizontal line represents Support or Resistance. Generally, the horizontal line gets broken by the price and the subsequent move is usually strong in that direction.