Terms used on Trading What I See
2B Setup
Vic Sperandeo, “Trader Vic”, named this setup. It consists of a trendline break after a significant move, followed by a false breakout in the original direction that fails. The failure creates the 2B setup, with prices now moving in the opposite direction. Here’s an example from an earlier post.
Divergence
Usually compares an indicator and price. In downtrends, when one is making higher bottoms and the other is making lower bottoms, there is a divergence. In uptrends, the tops are used for the comparison.
Trend day
A wide-range day where the open and close are at opposite ends of the range. It usually has a consolidation (pause) in the middle of the day.
Triangle
Triangle trendlines either point in opposite directions or one of the lines is flat, forming an upside or downside triangle (probable direction of breakout.)
Wedge
A wedge has two converging trendlines pointing the same direction (up or down). The expected movement, after the pattern is completed, is opposite to the direction of the trendlines.
