Stock Charts

To navigate the stock market, you must first understand how to read a stock chart. When investing in stocks, it is your most valuable tool.

It records a stock’s history, illustrates current conditions, and serves as a roadmap to show whether a stock is trending up or down. All experts, masters, and professionals have specialized tools to gather information, evaluate conditions, and make decisions with confidence. For investors, the stock chart is the tool that separates the novice from the MarketSmith.

How to Read Stock Charts

Stock charts record price and volume history to help you determine whether the stock is appreciating or depreciating in value. But skilled chart readers can determine much more by learning how to read stock charts. Subtle clues in the price and volume action can tell you many things including whether the stock is:

  • behaving normally or abnormally,
  • falling in or out of favor with institutional investors
  • beginning or ending a price advance

Daily Stock Charts

Daily stock charts are the best time-frame to gauge the current strength or weakness of a stock. Since each bar represents one day of trading activity, daily charts should be used to identify precise buy points and devise short-term trading strategies.

Weekly Stock Charts

Weekly stock charts are the best time-frame to spot longer-term trends and chart patterns in stock prices. The logarithmic price scaling used on most weekly charts also makes it easier to make relative comparisons between stocks or the major market indexes.

Stock Chart Analysis

One of the keys to continual success in the stock market is being able to identify which stocks have the greatest potential to become a big leader in the next bull market cycle. History has proven that great stocks display outstanding technical action before beginning their tremendous price runs. “Technical,” in this case refers to the characteristics displayed on a stock chart: price and volume. Technical stock chart analysis can help you size-up the potential opportunities and risks of buying or selling stock, enabling you to better react to changes in the behavior of stocks you own. Evaluating a stock’s price trend, support and resistance levels, relationship to key moving averages, and many other techniques can only be executed with the use of a stock chart.

Stock Chart Patterns

One way to assess technical strength is to evaluate the quality of the stock chart patterns that are made as the stock moves up in price. There are numerous chart patterns that skilled chart readers use to determine the health and direction a stock is trending. But again, none of that analysis can be done without a proper chart.

The probability of making money in the stock market rises significantly if you are using stock charts. You can properly evaluate the current conditions and make informed decisions.

Find out more about the benefits and features of MarketSmith.

“Investors who train themselves to decode price movements on charts have an enormous advantage over those who either refuse to learn, just don’t know any better, or are a bit lazy.”

— William O’Neil, How to Make Money in Stocks

Keywords: Chart Analysis

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