How To Read A Stock Chart

A Technical Analyst reads stock charts as a method of forecasting future price movements by analyzing previous price movements. Technical analysis is as accurate as a weather forecast, the predications are not absolute however, and they can help investors anticipate what is most "likely" to happen to prices within a given time.

A quick trick to reading a stock chart is to read it upside down. Meaning to first glance at the bottom of the chart and find the volume data by that you can assess whether a stock is accumulating or distributing.

Another simple way to read a stock chart is to take any stocks weekly chart and count at the bottom the number of up volume versus down volume weeks going back ten weeks. If the number of "up volume weeks" is larger than the number of "down volume weeks" (8 up vs. 3 down) then the stock is collecting; institutions are stocking up on it. If the opposite is true the case (say 3 up vs. 8 volume down wks) then the stock is distributing; institutions are getting out of the stock. You want to hold stocks that are accumulating.

Once you have decided this you want to look at day-to-day price movements. In them you will be able to recognize up or down trends, or flat periods where the stock price remains the unchanged. Most financial sites provide base patterns that are a series of price figures that define precise buy signals for stocks that are on their way up. When you learn to notice these in the charts you will be all set.

Analyzing a market index chart does not require a degree in economics. You have to be a CPA to analyze a stock chart. It does not matter if the chart is commodity, market index or a stock; a chart is always a chart. The technical principles of support, trend, trading range, resistance and additional aspects may be applied to any chart. Although this may seem simple, technical analysis is by no means simple. Succeeding in this field requires study, an open mind and dedication.