Stock Chart Technical Analysis
Technical analysis, the practice of forecasting future stock price movements based on historical trends and patterns, uses, among other tools, stock price charts to help predict future stock price performance. With stock price charts, technical analysts are able to observe a stock's movements and other data such as support and resistance. Support is the price level at which demand is strong enough to prevent further price declines. As prices decline towards their support level, the stock more attractive to buyers and sellers are less likely to sell, keeping the stock price at its support level. Resistance is the price level at which selling is strong enough to prevent further price increases, and its logic is opposite that of support. Both support and resistance may be seen on a stock chart. The trend line, which can be seen on a stock chart, is another important tool in technical analysis. A trend line is drawn between two or more price points, then is extended into the future, as a way to measure and predict support or resistance levels.A stock chart is also used to analyze price movements that occur on particularly significant days, such as upon earnings announcements or other significant news announcements related to the stock. Stock charts are also used to plot a stock's relative performance versus the market and to determine whether a stock is trading near all-time highs or all-time lows, or somewhere in between. Viewing volume data on a stock chart can also help an investor determine how heavily traded a particular stock is; if a stock has a low volume, it may be difficult to buy or sell.All of these analysis tools are available with stock charts, and not just for professional analysts. With access to several free stock charting tools on the Internet and by using tools like Excel to create stock charts, anyone may visually review the performance of stocks. Stock charts can help you to become more familiar with a particular stock, how it has performed in the past relative to other similar and dissimilar stocks and relative to the market, how it has performed relative to analysts' estimates, and the types of significant news events that affect its performance (e.g., oil stocks tend to move with changes in oil prices but not with changes in the price of sugarcane). Before investing in a particular stock, be sure to familiarize yourself with its price and volume performance over time.
About the Author
Johns Wu is the founder of The Bull Trader, a stock charts website that specializes in technical analysis. He is a graduate of UC Berkeley residing in Southern California. Visit their website at: http://www.thebulltrader.com/
Tell others about
this page:
Comments? Questions? Email Here