Which term describes the situation when price develops a swing high at an unexpected cycle low?

Prepare for the CMT Level 2 Exam with our quiz. Study with flashcards and multiple choice questions, each with hints and explanations. Get ready to excel on your path to becoming a Chartered Market Technician!

The term "cycle inversion" accurately describes the scenario where the price forms a swing high at an unexpected cycle low. In technical analysis, cycles are regular patterns that can emerge in price movements over time. An inversion occurs when the typical behavior of price movements deviates from what is expected, indicating a potential shift in market dynamics.

When a swing high appears at a cycle low, it suggests that there is a contradiction in the anticipated price action. Typically, one would expect to see a swing low at a cycle low, which aligns with the normal behavior of trends. This anomaly can signal that the prevailing trend might be reversing or that market participants are reacting differently than previously anticipated. The presence of this phenomenon highlights critical sentiment shifts and can provide traders with valuable information to inform their strategies.

The other terms listed represent different concepts in technical analysis that do not encompass the specific situation described in the question. Understanding cycle inversion facilitates a deeper appreciation of market behavior and trend analysis in technical trading.

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