Reading Stock Charts: A Guide for Investors

how to read stock charts

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A few charts to remember before you jump to conclusions – Yahoo Finance

A few charts to remember before you jump to conclusions.

Posted: Sun, 20 Nov 2022 08:00:00 GMT [source]

While not all act as true support or resistance, the ones that do tend to be critical as they can make or break a trend. The stock broke down and out of the channel on high volume. However, two days later on the volume three times greater than the average, the stock reversed back into the channel. If you would have sold the stock short , this would be a signal to cover and exit for a small loss. Strategy aside, this was most likely a news related price swing, and the very next week the broke out of the channel to the upside (above $40 a share). A triple bottom is a bullish chart pattern used in technical analysis that is characterized by three equal lows followed by a breakout above resistance.

How to Read Stock Charts for Beginners (Ultimate Guide)

But new CEO Tim Cook made some strategic moves with the company to turn it around, and the rest of the trendline shows that. Then around 2012, Apple noted that its profit margins were significantly decreasing, despite a growing smartphone market. Finally, they were trying to expand the smartphone into developing countries, where they were just too expensive to compete. News comes and goes, but when news coincides with a dramatic shift in the trendline, it’s something to pay attention to.

how to read stock charts

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Price Trend Indication

The main components also are found in charts for individual stocks. The strongest chart pattern is determined by trader preference and methods. The one that you find works best for your trading strategy will be your strongest one. This often results in a trend reversal, as shown in the figure below.

How Do You Read Stock Volume Charts?

Unlike price, volume is pretty uniform in charts. It’s almost always shown as a histogram. This is the bar graph that’s just under the price graph. Check the markings on the borders for what the lines signify.

The ascending triangle is a bullish ‘continuation’ chart pattern that signifies a breakout is likely where the triangle lines converge. To draw this pattern, you need to place a horizontal line on the resistance points and draw an ascending line along the support points.

What is Hedging in Investing? | Hedging Explained

Again, volume increases regardless if it is a buy or sell order. Time period – The X axis always displays the time period. If you view the dates left to right you will find that we are viewing a chart of the months of April, May, June, and July. These indicate barriers to further upward or downward movement.

how to read stock charts

Instead of a single point (i.e. the closing price), the day’s activity is shown as a symbol, in which the day’s 4 data points (i.e. the open, high, low and closing prices) are drawn. All these parameters taken together determine the price action which tells us the underlying behaviour of the investors in a stock, while volume tells us the intensity of that price action. And study of how to read stock charts the patterns gives us the probability of the price direction. So in other words – Fundamental analysis is the study of finances & policies of the company while technical analysis is the study of the psychology of traders & investors. Candlestick charts are similar to bar charts but show price action differently. Lots of traders love these charts because they’re rich in information.

More to consider when analyzing trends

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