how to read stock charts

During ever earnings season gems like these stocks below will appear and with a little practice your portfolio will be ready to capitalize on their future success. 100 day moving average The 100 DMA is a line that is formed by taking the average closing price of a stock over the last trailing 100 trading days. The 100 MA is not seen as frequently as the 50 simply because it typically draws further away from the trend. When it does come into the picture however it is very often noted. Beta shows how volatile a stock’s price is compared with the stock market, which may be an indicator of how risky the stock is.

how to read stock charts

Usually, the data points are closing prices and can specify any timeframe. This example of a stock chart depicts the price of Apple Inc. (AAPL) over the past year. The trading volume figures per period appear in light red and green along the bottom of the chart, with their 20-period MA shown in orange. The circled E and D letters along the bottom represent the ex-dividend and dividend payment each quarter for the stock.

Tips for Investing

See how Apple was in a sideways consolidation from 2001 through to 2004. When it eventually broke out of that channel upwards through resistance, the stock took off, making over 1600% gain. Timeframes are always plotted along the chart’s bottom and can be anything from 1-minute per bar (intraday) to 1 year per bar. This chart shows a Daily chart, which means each bar equals 1 day.

Day’s range shows the highest and lowest prices the stock has traded for up to the current moment of that trading day. That line, denoting price increases and decreases over a specified period of time, makes up the backbone of most stock charts. The y-axis (vertical axis) shows prices in dollars, while the x-axis (horizontal axis) shows how much time has passed in the chosen period. In this chart, the gray line shows how the stock is performing during after-hours trading. There are numerous different types of charts available in the stock trading market.

Stock Chart Pattern Accuracy

At the very bottom of the chart, you can see many small, vertical lines. This is a trend of the volumes at which the stock is traded. The value of the company doesn’t change, but the share price might. Companies will often do this if the price isn’t in line with competitors or to attract smaller investors (if the share price decreases).

This is an estimate of what the stock’s price could be in one year. And as anyone who’s been annoyed with their local meteorologist knows, forecasts can be wrong. Note there’s a 5 cent difference between the two — this is called the bid-ask spread.

Benefits of tracking volume

In a candlestick chart, the opening and closing prices of a period are represented by the body of each candle. The intraperiod highs and lows are represented by the “wicks” or “shadows” of the candle, vertical lines that extend out from the tops and bottom of the candle body. EPS (TTM) 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.

All of these triangles are essentially continuation patterns. They should give you some confidence that the trend will continue. Always be aware that you should be prepared to act if the Price breaks out in the wrong direction due to a shock (e.g., bad earnings or bad news). TEC provides a perfect example of how understanding gaps is critical to trading success. The Breakaway Gap usually occurs when a stock normally moves through a price range or channel, then the demand for the stock explodes, and the stock “gaps out” of the current trend. This is a sign of strength and a very bullish sign with a “gap up.” A breakaway gap to the downside is a sure sign of weakness.

Learn How To Read Stock Charts Step By Step

Many analysts also use trend indicators along with drawing trend lines, such as the 200-, 50- or 20-period MA. Patterns like breakouts can take place over a long period of time and tell you how to read stock charts something about trading right now. I teach my students to recognize the patterns I’ve traded successfully over the years. I have students trading most, if not all, of the patterns I teach.

But new CEO Tim Cook made some strategic moves with the company to turn it around, and the rest of the trendline shows that. News comes and goes, but when news coincides with a dramatic shift in the trendline, it’s something to pay attention to. For instance, Apple as a company really took off from 2009 to 2012. If you already have a good foundational knowledge of investing and want to improve your stock-picking acumen, read on. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page.

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