Read Stock Charts Like A Pro

The upper portion of the chart is called the Price chart. In the example above, the blue line shows the closing values of the stock. Moving the mouse over the chart will display the chart cursor. The details of the day under the cursor are shown in the top line of the chart area. Lots of people want to start investing but have no idea where to get started. Candlesticks are very similar to bar charts but I feel like they are used a lot more by traders than bar charts.

The interpretation of these lines is quite subjective, but learning about the process is important. Usually, everyone draws lines of resistance and support based on their investment horizon. After locating the trend line, you should look for the lines of resistance and support. These factors, combined with plenty of other variables, led to a steep decline in Apple’s stock price. Apple was taken out of the doldrums by the strategic moves implemented by new CEO Tim Cook. The rest of the trend line shows that turnaround quite well.

Stocks To Buy Now May 2021

In Fig 1.1, it’s a weekly chart, so this means that during the entire last week that MMM traded, $89.25 was the highest price that it reached. Again, because of this is a simple line chart, the line never actually touches $89.25 during the last week. This section will go over each part to ensure understanding.

Point & Figure Charts are very unusual as they feature no timeline along the bottom horizontal axis. The vertical price bar is arithmetic how to read stock charts and shows only units of price. EquiVolume Stock ChartEquiVolume Charts attempt to provide the solution of Volume at Price differently.

Configure Your Stock Chart

Being able to quickly identify if the stock is in a downtrend or an uptrend is probably one of the quickest ways to improve your investing abilities. Since intraday periods can be quite short , the price change during the period can be small, which can lead to flat looking price lines. But most charts allow you to move your mouse over the chart so you can see the OHLC values (open-high-low-close) for each period. Colors can be useful to help convey extra meaning in stock charts. Knowing how each color is used in the different parts of the stock chart will help you interpret their meaning faster and get more out of the chart.

Buying and selling based on the trendlines are shown here would have bagged you a 49% win. Time-frames are always plotted along the chart’s bottom and can be anything from 1 minute per bar to 1 year per bar. This chart shows a Daily chart, which means each bar equals 1 day. A “0” is plotted if the price moves down a whole price unit . When the price changes direction and starts to move upwards, an “X” is marked in each box. This filters out smaller price moves and enables us to focus on trend quality.

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However, knowing the past and present volumes can help with decision making. If you are wondering how difficult it is to read one, worry not. The entire process of mastering the art of reading stock charts, isn’t as difficult as it seems. All you need is basic knowledge of what to look for, and where to look for it, along with practice, practice and more practice! Before we begin with the method of reading one, let’s have a look at the different types of stock charts. Price Down–Volume Down in a downtrend can suggest that the retreat is slowing or beginning to end as fewer people are interested in buying or selling the stock at these prices.

It gives you an indication here of how to look at the chart and read the chart. As you look at some of these swing points, which are basically where prices change directions, you can see we’re creating a support level or a support line. The symmetrical triangle pattern is easy to spot thanks to the distinctive shape which is developed by the two trendlines which converge.

Drawing Trendlines To Recognise Stock Chart Patterns

This article is to illustrate how to read a stock report summary. Consult your stock broker before how to read stock charts buying and selling stock. Look here to see the stock price chart for AT&T on Yahoo Finance.

However I see the volume and bars change, e.g., Red, Green, Red, Green. I found an information that I have long been looking for i.e why candlestick and volume bar sometimes get different color. Compare that with the monochrome version of the same chart.

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Breakouts on volume that is heavier than normal carry greater significance than breakouts on lesser volume. These powerful moves can be either to the upside or downside for a stock’s share price. A break-away gap usually signals the middle of a significant move for the stock’s share price.

It quickly drops back below that supposed level of resistance, stays roughly there for a while, then begins to drop even more in July, finishing this chart just below 400. This is important info when you have invested in dividend stocks. In order to get a stock’s upcoming dividend, the investor must purchase shares of the stock prior to the ex-dividend date. A beta of 1.04 means that AXP is 4% more volatile than the market. Right below the company name is the Stock Exchange facility at which the company stocks are traded. As a beginning investor, you may be just learning that there is an endless list of Stock Exchange facilities.

In short, technical analysis is a great thing for a stock pundit to show off, but in many ways it’s a lot like reading tea leaves. You can see patterns in there, but identifying the meaning of those patterns and what they portend to the future is much more of an art than a science. Every dollar a company made, they are paying the indicated dollars per stock, price to earnings ratio, divide the current stock price by the earnings per share for the past year. You have price action displayed by the candlesticks and then you apply support, resistance and trendline drawings to identify trading opportunities. On the bottom of the chart, you can see many small, vertical lines. This is a trend of the volumes at which the stock is traded.

Their purpose is to tell you the pattern followed by a particular stock; whether it has gone up, down or, for that matter, sideways. The basic assumption for reading the charts is that a stock is most likely to follow similar patterns in future as it had done in the recent past. Looking at it, you can conclude that if a stock has followed an upward trend for quite sometime, then it would possibly maintain a similar trend in the immediate future. This means investing in such a stock would be safe and would possibly fetch huge returns. But to extract all this valuable information, you must know how to read a stock chart, which is one of the many ways to predict the stock market. If you can learn to recognize these patterns early they will help you to gain a real competitive advantage in the markets.

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You can use the High-Low-Close Stock chart to show the trend of stocks over a period of time. There are some important characteristics of volume and price in the marketplace. It is all about the direction of price movement compared to the increases or decreases in volume. Focus on the moving average lines crossing each other and the price crossing up or down through the moving average lines.

• It is essentially a false downwards breakout from a chart pattern.
• The trend then follows back to the support threshold and starts a downward trend breaking through the support line.
• When price breaks up through resistance, it moves higher; this could potentially be a buy signal.
• A price chart is a series of prices plotted over a specific time period.
• Those aggregate values are used to build the candlestick.
• You’ll be able to fast realize when a stock is being ponderously bought or sold.

While technical analysis is merely one’s most educated prediction, it is usually not perfectly precise. With this in mind, it is still an incredibly useful way to target possible trades that pose a high profit with little liability. This tells us that the demand for the stock was so strong on the open that it jumped many points higher. The opposite is true for a “gap down.” This signifies weakness as the stock gaps down usually due to aggressive selling. As a technical analyst with the International Federation of Technical Analysts , I am certified in how to read stock charts.

The blue line is the average of the closing price for the previous 180 days. It follows the trends of the closing prices much more slowly. And, because there are more values in how to read stock charts the average, it is much smoother. The x-axis is the same in this chart as in the price chart. The dates range from January 1, 2020, to March 12, 2021, going from left to right.

Posted by: Michelle Fox