how to read stock charts

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. As a trader, one of the most difficult things to do is predict trends in the stock markets.

The vertical height of the bar reflects the range between the high and low price of the bar period. The price bar also records the period’s opening and closing prices with attached horizontal lines; the left line represents the open, and the right line represents the close. Bars may increase or decrease in size from one bar to the next or over a range of bars. Notice how the bars expand and contract between periods of high and low volatility. As the market becomes increasingly volatile, the bars become larger and the price swings further.

Types of stock charts

And finally, the 61.8% Fibonacci retracement of the selloff for the all-time high to the Jan. 6, 2023 low — a $312.69, or roughly 75% plunge — would come in around $295. That’s roughly where the bounce off the Jan. 6, 2023 low ran out of steam, confirming the bears are still in control for the long term. It also sees the product launch as a key step for it to capitalize on its first-mover advantage in generative AI. Much of the rally has been driven by better than expected third-quarter earnings results, as well as the Federal Reserve’s less hawkish stance towards interest rates. The Fed kept interest rates unchanged at its FOMC meeting on Wednesday and gave no clear indication that it would hike interest rates next month. You can choose the RSI indicator via the Indicator tab at the top of the screen.

how to read stock charts

A big price gap on very high volume, which means strong institutional buying of the stock, could mean more higher prices to come. Time matters – The time measurement used speaks to the validity of a trend. Generally, monthly time series carry greater importance than weekly prices, which supersede daily prices.

Identifying Support and Resistance Levels

A golden cross is basically an indication that the stock is “gold”, set for substantially higher prices. You can also look at moving averages to gauge pricing trends and levels of support among investors. By looking at volume and pricing around key moving average points, like the 50-day, 100-day or 200-day marks, you can see whether investors are buying more of a stock, selling it off or simply holding steady. When reading a stock chart, moving averages can act as support or resistance. When a stock is trading around or on this line, it can tell you a lot about the stock’s price action and overall trend.

how to read stock charts

Next, you’ll want to identify lines of support and resistance. A line of support is a price that a stock is unlikely to drop below, while a line of resistance is one that it’s unlikely to go above. That is, until some major change occurs, such as a reduced profit margin. We can also see the stock price “closed” 15 cents higher than it did on the previous trading day (when the close price was $190.54), meaning the price rose by about .08%. The green line shows the various price changes throughout the day, but choosing any of the other time periods would show the various price changes throughout that span of time.

How Do You Read the Stock Market Index?

The vertical bars here show the number of shares traded during each time interval. These bars are color-coded green or red, based on whether the stock was up (green) or down (red). Low volume trading on Down Days – This is also a bullish indication since it indicates that on days when the stock’s price falls back a bit, not many investors are involved in the trading.

  • Even if the market goes through a lot of volatility or has high trading volumes, the number of bars plotted remains the same.
  • But it can help you make more informed decisions when it comes to buying and selling stocks.
  • As a trader, one of the most difficult things to do is predict trends in the stock markets.
  • While daily charts are probably the most commonly used, intraday, weekly, monthly, year-to-date (YTD), 5-year, 10-year, and a complete historical lifetime of a stock are also available.
  • By the end of this useful guide, terms like “dividend,” “trendline,” and “lines of support” won’t sound so foreign.

It’s a chart that shows information about a stock that includes current trading price, price changes, history of high and low prices, trading volumes, dividends, and a company’s financial information. The wide rectangular part of the candlestick is called the body. This part of the candle, sometimes called thereal body, represents the range between the stock’s opening and closing prices over a specific period. Bar charts depict a stock’s open, high, low, and close price. The vertical line on a price bar represents the high and low prices for the period. The small left and right horizontal lines on each price bar show the open and closing prices for the period.

The reason that volume is considered to be a very important technical indicator is a simple one. The vast majority of stock market buying and selling is done by large institutional traders, such as investment banks, and by fund managers, such as mutual fund or exchange-traded fund (ETF) managers. When those investors how to read stock charts make major purchases or sales of a stock, it creates high trading volume, and it is that kind of major buying and selling by large investors that typically move a stock higher or lower. Traders use stock charts and technical analysis as their primary means of determining when to buy and sell stocks.

This area also provides additional details on price, such as the time period’s opening and high prices. This chart displays the security’s volume, which is the total number of shares bought and sold during each time interval. The main purpose of any chart is to display the current price of an investment and how its price has changed over time.



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