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Reading Stock Charts: The Basics

how to read stock charts

Charts, or more specifically, price charts, are a graphical representation of a stock price movement over a period of time, whether it is the last hour, day, week, or year. Each type of chart provides information about the opening price, closing price, and highest and lowest prices at a specific time frame. Do you enjoy reading stock charts and looking at volume trends, how to read stock charts support, resistance, and drawing trendlines? Well, then you are very focused on technical analysis, which this guide introduces. Contrarily, if you like to base your investment decisions on sales growth, total debt, and metrics like EPS , then you are likely interested in fundamental analysis. Stocks charts are polarizing among investors focused on the long term.

You’ll also see how to buy stocks and when to sell stocks. Learning these concepts and how to read stock charts will also help you properly handle newer IPO stocks to watch. You can learn from the behavior in the stock charts of companies like Zoom Video Communications and Peloton Interactive before, during and after their pandemic-driven moves.

Candor’s RSU trading plan: a guide to 10b5-1

They can signal a move in either direction when the top and bottom bands close in. It declines once more, rises to the level of the first shoulder, and declines again. Then it declines and rises again to a higher peak, forming the head. The price rises to one level, forming the first shoulder. A stock’s typically gearing toward a run when the top line is horizontal and the bottom line is ascending. On the flip side, the stock could tumble if the bottom line is horizontal and the top is descending. Price is the most basic thing you’ll find on almost every chart.

how to read stock charts

EPS stands for earnings per share for the last 12 months (or, technically, “trailing 12 months”), and that number is the “E” in PE ratio. You can get this number by dividing the most recently reported company earnings by the number of the company’s shares available on the stock market. The earnings date is the publicly displayed window of time for when the company will announce its latest quarterly earnings. To put it simply, they are the key to making it in the stock market. This is extremely important for traders as they use technical indicators and repetitive chart patterns to predict the next price movement of a stock or any other financial asset. The day trader’s main working tool is the chart or graph.

Moving Averages

Day’s range shows the highest and lowest prices the stock has traded for up to the current moment of that trading day. There are a few different types of stock charts, and each reads a bit uniquely. Bar and candlestick charts show you the opening, high, low, and closing prices for stocks, so you can see what’s happened throughout the day. Line charts only show you each day’s closing price, which is more of a summary view. Chart patterns are at the core of technical analysis, which evaluates investments and opportunities for stock trading through the use of price trends and patterns viewed on stock charts.

Chart Check: Uptrend intact in this IT company that rose over 100% in a year post breakout – Economic Times

Chart Check: Uptrend intact in this IT company that rose over 100% in a year post breakout.

Posted: Thu, 27 Oct 2022 06:10:00 GMT [source]

Bar charts are typically color-coded to show positive price movement or negative movement . At the bottom of the chart, multiple small and vertical lines show the trend of stock traded volume.

How To Read Stock Charts

Typically, moving above or below the moving average of the past 200 days indicates a significant move coming ahead. Therefore, analysts can apply this phenomenon and essentially predict what the price of a stock will look like simply by analyzing the moving average on its stock chart. For example, the daily chart of Nike’s public trades may demonstrate a recent uptick in volume trading on that asset, though the price has not risen much.

how to read stock charts

This would be a great entry point for a short position . As can be seen in the chart, Google dropped from $675 to under $450 (-33%) over the next two months. Overall, gaps occur in all different shapes and sizes and can be a means of predicting the price movement of a stock over the next several months. Not all gaps tell the same story though, so it is important to conduct your own research before considering a trade.

What exactly is a stock chart, and how does it help you analyze stocks?

Therefore, one should use the trend line to invest in stocks as a high indicator line. Therefore, the trend line should be used to invest in stocks as a high indicator line. Trend LineA trend line, often known as the best-fit line, depicts the data’s trend. It shows the overall trend, pattern, or direction based on the data points available. Advisory services provided by Candor Financial LLC, an SEC registered investment adviser. Brokerage services provided to clients of Candor Financial LLC by Apex Clearing, an SEC registered broker-dealer and member of FINRA/SIPC. Metrics can be visually depicted in many ways, though the most common forms are bar, candlestick, and line charts.

  • Studies indicate at least 90% of aspiring day traders will not be profitable.
  • If you would have sold the stock short , this would be a signal to cover and exit for a small loss.
  • Dividend PayableDividend payable is that portion of accumulated profits that is declared to be paid as dividend by the company’s board of directors.
  • The moving average lines simply track the share price movement over a period of time.

The two time periods represent a year of trading days and a quarter. If the stock price is above them, it is trending up; if it is below them, it is trending down. You may have to pay if you want to receive official price data from a market. Average daily volume – By knowing the total volume on a day, you can understand the power of influence on a given stock. The greater the volume, the more significant and overall meaningful the day was. High volume days are most often observed on earnings days or when news is released. Each chart type for performing technical analysis has its benefits.

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