The base we are focusing on here was a seven month cup with handle base that formed from March through October 2010. Here is a daily chart showing the original base that started an 80%+ move for the stock. After a peak and pull back in early December, volume drops off as SINA forms yet another base. After such a strong run, volume dropping off minimizes any sell pressure and affirms investors are overall satisfied with the stock at its current levels. This leads into an early January breakout through $74 on record volume yet again. After an exhaustion gap in late November 2009, SINA peaks over the next two months then falls into a fresh base in 2010.

how to read stock charts for dummies

FOSL posts positive earnings and gaps through key resistance at $43. Investors should note that the high on this day was $46.30, just $.05 above the stock’s all-time record high set way back in December 2007 . The gap range was filled with support found at $43. This is an important distinction as resistance became support, exactly what bulls look for in a pull back.

Daily Vs Weekly Charts

The height of the bar tells you the number of shares sold that day. Trading volume can provide important clues about what’s going on with the stock. For example, if a stock is in an upward trend and volume is higher than usual for that stock, it hints there’s a lot of demand for the shares and investors are bidding the price up. When the volume starts to drop off, it indicates lower demand and the upward trend in the price may be about to reverse direction and fall. Once you know how to read stocks, you will learn that there’s a story behind charts and one of them is a glimpse of what’s happening in the broader market. You can minimize loss and maximize profit just by looking at how it’s projected to perform. Smart traders are able to read stock chart and fetch profit irrespective of whether the market is going up or falling down or just simply moving sideways.

Conversely, the resistance line is a certain price that the stock typically doesn’t trade above – it “resists” the stock pushing through that top price. In addition to just the trend of the stock’s prices, the stock’s trading volume is how to read stock charts for dummies another key factor to look at when reading a stock chart. A stock chart is a little different than the basic information on a stock – stock charts include charting, or plot lines, which represent the price movements of the given stock.

How To Read A Stock Chart Basics

Then you can start playing with other chart styles. To get an idea of the different chart styles, let’s look at KBLB again. Each chart below is over 10 days with a 15-minute period. Aside from changing the chart style — and the background on the line chart — this is the exact same chart. Clearly see when a stock is primed for a big move — like a supernova or an overnight gap up on a first green day.

how to read stock charts for dummies

Again, the y-axis on a stock chart represents price and volume. Price is typically shown as a line graph, a bar graph, or with candlesticks. Some charting software allows histogram and area graphing as well.

Stock Chart Reading For Beginners: Why Use Charts?

Investing in companies with a large market cap will mean huge returns because of a consistent increase in share value. The New York Stock Exchange and the how to read stock charts for dummies Nasdaq Stock Exchange are first on the list of the 1 Trillion Club, referring to securities exchange with a market capitalization of over 1 trillion.

The three “1”s show us how CVD stock found resistance at $88 three times before finally breaking through. Participating in the break would have yielded an actual return of 10% in only seven days. For a day to be considered a distribution day, the stock not only has to end down (net $ change), but there also has to be more volume than the day before. Remember too that, like accumulation days, the volume not only needs to be greater than the day prior, but also greater than the 60-day average. Below I have taken a stock chart of the NASDAQ Composite and labeled the main parts.

Candlestick Charts3 Lectures

The stock has had so many up days that it hasn’t touched its 50 day moving average for well over three months. Eventually though, the stock starts falling towards its 50 DMA, and one day it finally hits it but immediately bounces back higher in price during the same trading day. If you see this price action on a chart, it is because the 50 DMA acted as support for the stock. Daily Moving Averages are, alongside volume, the most commonly used technical indicator. In short, a daily moving average is a line added to any stock chart that represents the average price of a stock over the last xx days.

In order to read or download stock charts for dummies pdf ebook, you need to create a FREE account. With a little how to read stock charts for dummies bit of practice, you’ll soon be able to find winning stocks and learn the best time to buy or sell them.

Best Stock Scanners

While you can customize how the chart is drawn , price lines are generally represented in a line or mountain chart form. The thin line represents the price movements over a given period, generally six months or one year. If you are working with an interactive chart, you can set the chart to different time frames, from five years back to one day. Understanding a few basic concepts and taking a look at Amazon.com , PayPal , Square , Nvidia and Apple reveals the answers. Learning how to read stock charts will also help you properly handle newer IPO stocks to watch like Pinterest , Cambium Networks and Lovesac reveals the answers. Learn the techniques a full-time Professional Trader uses every day for Swing Trading and Day Trading.

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Open Price

The chart uses an “X” to mark increases in price and an “O” to mark lower prices. With this approach, it is easier to spot trends and reversals.

If the bar is red, that means the stock or in this case the index was DOWN overall on the day compared to the previous day. Black bars mean that the stock was even or UP on the day compared to the previous day.

Traders developing automated algorithms may have entirely different requirements that use a combination of volume indicators and technical indicators to drive decision making. Many investors analyze stocks based on their fundamentals – such as their revenue, valuation, or industry trends – but fundamental factors aren’t always reflected in the market price. Technical analysis seeks to predict price movements by examining historical data, mainly price and volume. I am new to trading and find your book extremely interesting. I was able to get Stockstotrade and hope that will help.

I studied them and learned to understand what they meant. Stock chart analysis is a skill, and like any other skill, one only becomes an expert at it through practice. Therefore, it’s in your best interest as an investor to begin, or continue, your education in stock chart analysis. Stock chart analysis is not infallible, not even in the hands of the most expert technical analyst. If it were, every stock investor would be a multi-millionaire. However, learning to read a stock chart will definitely help turn the odds of being a successful stock market investor in your favor.

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