Investing for Beginners: How to Read Stock Charts

Below that, you can see how the stock has changed over the time period you’ve selected. You can see Tesla has increased by $284.78, or nearly 40 percent, over the past year. 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. Relative strength is a way to measure whether a stock is overbought or oversold.

The close is the price at which the stock stopped trading during normal trading hours (after-hours trading can impact the stock price as well). If a stock closes above the previous trading day’s close, it is considered an upward movement for the stock (and will affect things like candlestick charts, which we’ll get to later).

What exactly is a stock chart, and how does it help you analyze stocks?

The 52-week high and low show the highest and lowest prices at which the stock traded in that time period, although they don’t often show the previous day’s trading price. We provide high-quality financial charts for US stocks , US Mutual Funds, Canadian stocks , UK stocks and Indian stocks . We also provide over 1000 technical market indicators and indexes as well as end-of-day charts for most US commodity contracts. Accumulation days are very positive events, because they signal underlying strength due to the fact that institutions are accumulating shares and pushing the stock price higher.

The candlestick will show the high, low, open, and close prices on the day. In the most basic sense, when reading a stock chart, a green line going upwards is good, and a red line trending down is bad.

Support and resistance

We have a wide array of features available for you to use for free, with no account necessary. To browse our free charting tools and resources, visit our Charts & Tools page. To read free expert market commentary from our content contributors, visit our Articles page. If you are actively trading or investing in the financial markets, a StockCharts Membership how to read stock charts is like buying the right tool for your craft. This wonderful product has made me a more skilled, more successful investor, as if I am a master craftsman.” This was one of the main catalysts that really strengthened the number of institutional investors holding the stock. These institutional investors only further fueled the price rise in future months.

• Weekly charts help you see longer-term trends, while intra-day charts help you spot specific buy and sell signals.
• Massive gaps like this one are often marked as exhaustion gaps as they very typically come right before or at the top of parabolic moves.
• Conversely, small vertical lines mean the stock is relatively stable over that period.
• However, noting an increase or decrease in volatility on a stock chart can be an essential first step in deducing why the charting is performing abnormally.
• News comes and goes, but when news coincides with a dramatic shift in the trendline, it’s something to pay attention to.
• EPS stands for earnings per share for the last 12 months (or, technically, “trailing 12 months”), and that number is the “E” in PE ratio.

Savvy investors use charts to spot anomalies and patterns, and to make wise decisions when buying or selling stocks. Charts help you spot timely sell and buy signals, and to analyze the health of a stock. It acts as a ceiling for stock prices at a point where a stock that is rallying stops moving higher and reverses course. Buyers will need more conviction to penetrate resistance levels in future rallies. Here are the basics on reading stock charts for beginners. Learning how to read stock charts may seem intimidating at first. But with some basic tips and a little practice, you’ll soon be using them to improve your stock picks and find stocks to watch.

Using Technical Indicators

The closer the average moves towards the upper band, the more overbought the security is. The closer if trends towards the lower line, the more oversold it is. In this picture, the RSI is represented by the purple line at the bottom. Traditionally, an RSI above https://www.bigshotrading.info/ 70 means that the security is overbought, and an RSI below 30 means that the security is being oversold. “Overbought” means that the security is priced above its true value and “oversold” means that traders believe a stock is selling below its true value.

• Candlestick charts are similar to bar charts but show price action differently.
• This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories.
• The “cup” portion of the pattern should be a “U” shape that resembles the rounding of a bowl rather than a “V” shape with equal highs on both sides of the cup.
• Ross Cameron’s experience with trading is not typical, nor is the experience of traders featured in testimonials.
• Once you understand those concepts, you’ll be ready to spot — and profit from — chart patterns like the cup with handle, double bottom and flat base.

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