Stock charts allow you to see the past and recent price performance of a company’s shares. Volume and price indicators are significant to stock charts and the ability to see historical price patterns and trends to predict future price movement. If you’re going to actively trade stocks as a stock market investor, then you need to know how to read stock charts. Do you enjoy reading stock charts and looking at volume trends, support, resistance, and drawing trendlines? Well, then you are very focused on technical analysis, which this guide introduces.
- Looking at a stock chart is one of the easiest ways to get a sense for how the stock’s price has performed over a certain period of time.
- A trendline that angles up, or an up trendline, occurs where prices are experiencing higher highs and higher lows.
- Nearly all stock charts give you the option to switch between the various types of charts, as well as the ability to overlay various technical indicators on a chart.
- They are often formed after strong upward or downward moves where traders pause and the price consolidates, before the trend continues in the same direction.
- Looking at volume and pricing trendlines together can help you understand investor behavior and trends for a stock.
To form a proper chart pattern, you have to have a prior uptrend. The idea behind bases is that after making a decent run, the stock takes a breather, then forms stepping stones to set up an even higher climb. As we saw earlier in the section on how to invest in stocks, how to read stock charts the N in CAN SLIM stands for a “new” product or industry trend, but it also refers to a new 52-week price high. After a stock has established a floor of support and built the right side of a chart pattern, it will eventually run into a new ceiling of resistance.
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These patterns signify periods where the bulls or the bears have run out of steam. The established trend will pause, then head in a new direction as new energy emerges from the other side (bull or bear). Dividend yield is the stock’s dividend divided by the stock price.
But over time, they tend to reflect the performance of the underlying business. By understanding the basics of how to read a stock chart, you’ll be able to analyze new stock ideas more quickly and choose which investments are worth digging into further. Stock charts and their accompanying data can appear complex and may be difficult to understand for new investors.
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A trendline that angles up, or an up trendline, occurs where prices are experiencing higher highs and higher lows. Conversely, a trendline that is angled down, called a down trendline, occurs where prices are experiencing lower highs and lower lows. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology.
How do you predict if a stock will go up or down?
In short term, a span of 2-3 months, stock price movement is mostly speculative. If there are more buyers, the price goes up. If there are more sellers, the price falls.
Our stock charts are also color-coded to make it easier to spot daily and weekly moves, as well as spot trends. By the end of this section, you’ll know the basics of how to use stock charts. You’ll also see how to use technical analysis to make sense of the “story” the charts are telling. Once you’ve done that and also gone through the earlier sections, How To Buy Stocks and Stock Market Timing, you’ll have a solid understanding of how and when to buy stocks.