glossary

Glossary

2015

JANUARY 1, 2015

AUTHORED BY SHELDON MCINTYRE

360° Virtual Advisor Powered by Marketfy | Santiago Chile

Glossary | February 2, 2015

© 360° Virtual Advisor Powered by Marketfy

GLOSSARY

This brief has been prepared by 360° Virtual Advisor for distribution to our current subscribers at Marketfy.com. It should not be considered as investment advice or a recommendation to purchase any particular security, strategy or investment product. References to specific securities and issuers are

not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Some information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

Hypothetical performance results do not include trading commissions and other execution costs that would be incurred if the Pole Position Model Portfolio™

trades were actual trades. Trade prices that are used for the Pole Position Model Portfolio™ performance calculations are based on the real-time data sources

that are used in-house, and may be different from what is achievable and are for guidance only. There may also be differences between the price as it appears on

the Marketfy platform and the current price that you see from your terminal due to delays in internet connectivity, quote delays and market conditions, and also

due to times when we’re not available to make the trade at the moment a previously stated target has been met. The availability of stock for shorting could also

influence returns. Past performance is no guarantee of future results.



GLOSSARY

GLOSSARY

52-Week Hi-Lo

Indicates the highest and lowest price the stock has reached in the last 52 weeks of trading. Price range data includes intra-day highs and lows.

Advance/Decline Index

A technical analysis tool that represents the total difference between the number of advancing and declining security prices. This index is considered one

of the best indicators of market movements as a whole. Stock indexes such as the Dow Jones Industrial Average only tell us the strength of 30 stocks,

whereas the advance/decline index can provide much more insight into the movements of the market.

Bear Market

A long period of time when prices in the market are generally declining. I measure it by a percentage decline of 20% or more.

Bearish Divergence

A situation when price records a higher high and the indicator forms a lower high. The indicator does not confirm the higher high in prices and this could

foreshadow a reversal.

Breakaway Gap

A price gap that forms on the completion of an important price pattern. A breakaway gap usually signals the beginning of an important price move.

Bullish Divergence

A situation when price records a lower low and the indicator forms a higher low. The indicator does not confirm the lower low in prices and this could

foreshadow a reversal.

Churning

A period of heavy trading with few sustained price trends and little movement in stock market indexes.

Climax Top

When a stock suddenly advances at a much faster rate for one or two weeks after an advance of many months. Generally occurs in the final "stages" of a

stock's price advance, indicating a leveling off or decrease in future price movements. Often accompanied by a gap up in price.

Continuation Pattern

A technical analysis pattern that suggests a trend is exhibiting a temporary diversion in behavior and will eventually continue on its existing trend.



GLOSSARY

Contrarian Indicators

Specific psychological indicators used by investors who subscribe to contrarian strategies. Historically, when these indicators reach one extreme or

another, this foreshadows contrary market activity. For example, some Contrarian investors believe that when a large majority of market analysts are

bullish, it is likely that the market is about to top. Likewise, when most market analysts are bearish, they believe that the market is preparing for another

advance.

Correction

A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index. Corrections are generally temporary price declines,

interrupting an uptrend in the market or asset.

Cyclical Bear

Cyclical swings in the market can last from several months to a few years, and are designed to be in line with the primary trend. A cyclical bear market is a

cyclical swing when the market is in a downtrend.

Cyclical Bull

Cyclical swings in the market can last from several months to a few years, and are designed to be in line with the primary trend. A cyclical bull market is a

cyclical swing when the market is in an uptrend.

Cyclical Stock

A stock that rises quickly when economic growth is strong and falls rapidly when growth is slowing down.

Death Cross

A crossover resulting from a security's long-term moving average breaking above its short-term moving average or support level.

Falling Knife

A slang phrase for a security or industry in which the current price or value has dropped significantly in a short period of time. A falling knife security can

rebound, or it can lose all of its value, such as in the case of company bankruptcy where equity shares become worthless. A falling knife situation can

occur because of actual business results (such as a big drop in net earnings) or because of increasingly negative investor sentiment.

Fighting The Tape

The action of placing a trade or trades that go against the ticker tape.



GLOSSARY

Follow-Through Day

A follow-through day occurs during a market correction when a major index closes significantly higher than the previous day, and in greater volume. It

happens Day 4 or later of an attempted rally. Leading up to a follow-through day, an attempted rally takes place during a downtrend when a major index

closes with a gain. The rally attempt continues intact as long as the index doesn't make a new low. Follow-through day variables include: an index closing

sufficiently above 2% on increased volume, positive behavior of leading stocks, and improved market action regarding support vs. resistance levels. The

most powerful follow-through days often happen from Day 4 through Day 7 of an attempted rally. In the wake of a follow-through day, the market should

continue to add gains in strong volume, with breakouts by top stocks. This is further confirmation a new uptrend is underway.

Guidance

Information that a company provides as an indication or estimate of its future earnings. Also known as "earnings guidance."

Lagging Indicator

An economic factor that changes after the economy has already begun to follow a particular pattern or trend; used to confirm long-term trends.

Late-Stage Base

A base that forms after a stock has staged a series of technical breakouts from prior bases. They usually occur near a stock's top and are often referred to as

fourth- or fifth-stage bases. Late-stage bases often show erratic, wide-and-loose trading.

Leader or Laggard

Refers to a company that is either outperforming or under-performing the general market.

Leading Indicator

An economic factor that changes before the economy starts to follow a particular pattern or trend; used to predict changes in the economy.

Let Your Profits Run

A saying often used in investing that acknowledges the tendency among investors to sell winning positions too early. Most traders tend to take gains off

the table early out of fear that they will evaporate quickly, while they also tend to hold onto large losing positions in the hope that they will turn around.

The key to letting your profits run is to not panic when volatility increases and to maintain your convictions about why you entered into the trade.

Mean Reversion

A theory suggesting that prices and returns eventually move back towards the mean or average. This mean or average can be the historical average of the

price or return or another relevant average such as the growth in the economy or the average return of an industry.



GLOSSARY

Mechanical Investing

Buying and selling stocks according to a screen based on predetermined criteria, usually with the help of technical indicators such as relative strength or

momentum. This method allows traders to enter transactions without emotion and back-test their strategies by using historical data from any time period.

Momo Play

A slang term used to describe an investment purely as a momentum play, not worrying about the company's fundamentals.

Outside Reversal (Bearish or Bullish)

A charting trend in which a stock price's high and low for the day exceed those of the preceding day.

Panic Buying

High volume buying brought about by sharp price increases.

Panic Selling

Wide-scale selling of an investment, causing a sharp decline in price. In most instances of panic selling, investors just want to get out of the investment,

with little regard for the price at which they sell.

Peer Relative Strength

It is a term used to describe how a stock is performing relative to it's sector or industry group.

Pivot

A price level established as being significant either because the market fails to penetrate it or because a sudden increase in volume accompanies a move

through that price level.

Position Sizing

The dollar value being invested into a particular security by an investor. An investor's account size and risk tolerance should be taken into account when

determining appropriate position sizing.

Position Trader

A type of stock trader who holds a position for the long term (from months to years). Long-term traders are not concerned with short-term fluctuations

because they believe that their long-term investment horizons will smooth these out.



GLOSSARY

Post-Analysis

Vital process of evaluating your successes and mistakes in the stock market by posting all previous buys and sells on charts for a specified time-frame and

separating out those that made money from those that were losses. Allows investors a way to improve their future performance by realistically learning

from past decisions.

Protective Stop

A strategy that aims to limit potential losses to a desired amount by using a stop-loss or stop-limit order.

Psychological Market Indicators

Various technical measurements such as 'ratio of put volume to call volume', '% of market advisors bullish vs. bearish' etc., that attempts to measure the

psychology of investors.

Quadruple Witching

A day on which contracts for stock index futures, stock index options, stock options and single stock futures (SSF) all expire.

Relative Strength (RS) Line (MarketSmith)

A stock's Relative Strength line compares a stock's price performance versus the S&P 500 index. Many charting services plot a RS Line along with the

stock's price, moving averages, etc. The line is derived by dividing the stock price by the S&P 500 Index value. An upward sloping line means that the

stock's price is outperforming the S&P 500 Index.

Risk Averse

A description of an investor who, when faced with two investments with a similar expected return (but different risks), will prefer the one with the lower

risk.

Risk Management

The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management

occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate

action (or inaction) given their investment objectives and risk tolerance. Inadequate risk management can result in severe consequences for companies as

well as individuals. For example, the recession that began in 2008 was largely caused by the loose credit risk management of financial firms.

Scalping

A trading strategy that attempts to make many profits on small price changes. Traders who implement this strategy will place anywhere from 10 to a

couple hundred trades in a single day in the belief that small moves in stock price are easier to catch than large ones.



GLOSSARY

Secular Bear

Secular moves in the market can last from several years to decades, and are designed to call overriding trends through several cyclical cycles. A secular

bull is an upward-trending secular move in the market.

Selling Into Strength

A proactive trading strategy carried out by selling out of a long or into a short position when the price of the asset being traded is still rising but is expected

to reverse in price. Opposite of "buying into weakness".

Sentiment Indicator

A general term used to describe indicators that gauge investor attitudes toward the market.

Shakeout

A situation in which many investors exit their positions, often at a loss, because of uncertainty or recent bad news circulating around a particular security

or industry.

Short Interest Ratio

Indicates the number of days it would take short-sellers to cover their positions.

Short Squeeze

A situation in which a lack of supply and an excess demand for a traded stock forces the price upward.

Slippage

The difference between the expected price of a trade, and the price the trade actually executes at. Slippage often occurs during periods of higher volatility,

when market orders are used, and also when large orders are executed when there may not be enough interest at the desired price level to maintain the

expected price of trade.

Speculative Bubble

A spike in asset values within a particular industry, commodity, or asset class. A speculative bubble is usually caused by exaggerated expectations of

future growth, price appreciation, or other events that could cause an increase in asset values. This drives trading volumes higher, and as more investors

rally around the heightened expectation, buyers outnumber sellers, pushing prices beyond what an objective analysis of intrinsic value would suggest. The

bubble is not completed until prices fall back down to normalized levels; this usually involves a period of steep decline in price during which most

investors panic and sell out of their investments.



GLOSSARY

Sponsorship

Refers to the shares of a company owned by an institution. The largest sources of demand for stocks are mutual funds and other institutional buyers.

Stage of Base

A term referring to the number or 'stage' of the bases a stock will form as it advances on its way up in price. Successful stock advances over a year can

consist of two, three or four bases on the way up before going into a major decline. The initial base is referred to as a 'first stage' base, the second base as

the 'second stage,' etc.

Technically Strong Market

A situation in which the stock market is rising on high volume or falling on low volume.

Technically Weak Market

A situation in which the stock market is rising on low volume or falling on high volume.

Tick Index

The number of stocks trading on an uptick minus the number of stocks trading on a downtick.

Triple Witching

An event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days

happen four times a year on the third Friday of March, June, September and December.

Up/Down Volume Ratio

A 50-day ratio that is derived by dividing total volume on up days by the total volume on down days. A ratio greater than 1.0 implies positive demand for a

stock.

Value Trap

A stock that has experienced a large price depreciation and is mistaken to be a value stock.

Wedging

Technical term referring to how the handle area of a “cup with handle” price pattern moves up over a period of a week, just prior to the “pivot” or buy

point. This is not a constructive signal. Proper handles should show a drifting off or a minor downtrend prior to the breakout point. Handles that wedge up

tend to indicate a faulty pattern and are prone to failure.



GLOSSARY

Whisper Number

Traditionally, the unofficial and unpublished earnings per share (EPS) forecasts that circulate among professionals on Wall Street. In this context, whisper

numbers were generally reserved for the favored (wealthy) clients of a brokerage. A company's forecasted future earnings or revenues according to the

collective expectations of individual investors. In this sense, a whisper number would be compiled by a website polling its visitors. Individuals come up

with a whisper number using their own analyses of company financials, market trends, gut feel, etc.



GLOSSARY

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