What situation constitutes a swing low?

A swing low is defined in technical analysis as a point where the price has made a temporary bottom before moving higher, typically characterized by a series of price movements. It occurs when the current price is lower than the previous two price points but then makes a bounce upwards.

Choosing the second option, which states that it involves a lower low than the previous two days, accurately describes this scenario. This situation indicates that the price has declined, creating potential buying interest as the market prepares to shift direction, signaling to traders that a reversal may be on the horizon.

In contrast, the first option describes a situation where there are two consecutive higher closes, which indicates an uptrend but does not define a swing low. The third option, which suggests a higher low than the previous two days, points toward a potential swing high rather than a swing low, implying strength rather than weakness. The fourth choice, stating an equal low over three days, might indicate consolidation but does not signify a distinctive swing low, as it lacks the crucial aspect of a lower price preceding the reversal.

Thus, the correct identification of a swing low is fundamentally rooted in the price action of being lower than previous conditions, setting the stage for a bullish reversal.