V-formation

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V-Formation

In technical analysis, a situation in which a security steeply declines in price, and then steeply recovers. A V-formation may be bullish, but many analysts believe that a V-formation is risky because of the possibility that another steep decline could occur. See also: W-type bottom, V-shaped recovery, W-shaped recovery.

V-formation

In technical analysis, a chart formation caused by a sharp extended decline followed by a sudden upward movement. Some chartists believe a V-formation is not generally a good indicator of a major change of direction in a security's price. These people believe that a major price reversal requires a period of testing low prices with succeeding price advances and declines. Only after this consolidation phase takes place can a new bull movement be assured.