Alix Spruce, Nathan Moore, “Chart Smarts” Alix Spruce, Nathan Moore,

Reading candlestick charts Candle stick charts are color coded so that you can easily see any relationship between a stocks open and close price, and the stocks price range. If a candlestick is white this indicates a bullish market If a candlestick is dark this indicates a bearish market (stock closing lower than it opened) The colored areas are “the body” of the candlestick, the lines above or below these bodies are “shadows”. Since evaluation of price movement is generated by market activity (past prices and volume) the market prices display a repetitive pattern, the candlestick charts are the optimal choice for forecasting trading entries and exits.

Chart examples

Candlestick chart comparison

Candle stick chart smarts By looking at the length of a candlestick charts main body and its wick length, you can tell its position in relation to the days high and the day low. The wicks length can be seen above and below the body of the candle, so a candlestick chartist would be able to clearly analyze the current days relationship between the closing and opening price of a stock. The candlestick trader can also make more efficient decisions quickly

Candlestick charts

Bar Charts

Bar charts Bar charts are another way of predicting and analyzing . They are used in a higher volume than candle stick charts because of their simplicity. The bar charts “ticks” are at the top and bottom 90 degree angle mark of the body. Bar charts provide a general sense of a daily price range for a stock, and also aid in creating channel lines. Channel lines are continuation patterns that slopes up or down. The upper trend line marks resistance and the lower trend line marks support.

Resistance & support in bar charts

Resistance & support in bar charts Support and resistance identify areas of supply and demand. Supply on a chart is where sellers usually overwhelm buyers causing the stock to go down, creating a resistance. When buyers are likely to, or actually do overwhelm sellers demand is created so stock goes up, and this is labeled as support. Supply (resistance) happens because traders that bought too late and saw the price go down now want to get out at break even so they sell. Demand (support) usually comes from traders that missed the move up and now have a second chance to get in so they buy. On the long side: When a stock falls down to a prior low it is more significant than when a stock falls down to a prior high. On the short side: When a stock rises up to a prior high it is more significant that when a stocks rises up to a prior low.

Trading Information interpreted from bar charts Bar chart info Trading Information interpreted from bar charts Open - The first price traded during the bar High - The highest price traded during the bar Low - The lowest price traded during the bar Close - The last price traded during the bar And upward bar means it closed higher than it opened at, and a downward bar is closing lower than it opened. These two compared are the “range” of the bar. Time Frame Bar charts can be set to any length of time number of ticksticks amount of volume price range. Each bar on a bar chart represents the trading that occurred during the time frame.

Moving Averages Moving average “ribbon”

Moving Averages A moving average is a technical analysis tool used for judging a market’s current trend There are many different types of moving averages and they each are calculated differently, however they all have a similar effect on the data. It is used to track price changes and determine when a trend may be changing by using various lengths of time. Moving averages assist in determining when to buy and sell. There are three types of Moving Averages: 1) Simple Moving Average (SMA) 2) Weighted Moving Average (WMA) 3) Exponential Moving Average (EMA)

Simple Moving Average (SMA) It’s calculated by taking a certain amount of data points, summing the data points, and then dividing the sum by the number of data points. In other words, it is the average stock price over a certain period of time.

Weighted Moving Average (WMA) It is calculated by multiplying each of the previous day’s data by weight and is designed to put more weight on recent data and less weight on past data. In other words, it is a moving average that is weighted so that more recent values are more heavily weighted than values further in the past.

WMA Chart example

Exponential Moving Average (EMA) A method by which the most recent data points are more heavily weighted It puts more weight towards recent data and less weight towards past data Calculated by applying a percentage of today’s closing price to yesterday’s moving average value

(EMA) Chart example

Line charts

Line Charts Charts are used to predict future price trends, but it is no sure way to predict future outcomes. The line chart is the most basic of the four charts because it represents only the closing prices over a set period of time. The line is created by connecting the closing prices over the time frame. The closing price is often considered the most important price in stock or index data. Line Charts do not show the trading range for the high, low, and opening prices of a stock or index.

Line chart examples This is a line chart along with a candlestick, which displays how line charts give a more general indication VS the color coded candlestick

Indicators of technical analysis Tools of Line Charts There are different tools you can look at to see how a stock or index is doing or is going to do. Indicators of technical analysis Moving averages: lagging indicators that confirm a trend’s direction Oscillators: these help measure whether the market is overbought or oversold

Main factors of Chart Techniques Three main factors of charting techniques Trend lines: a straight line or parallel straight lines indicating the trend in which a stock or index has been moving Support: the price level at which a stock or index will receive considerable buying pressure (should be thought as the floor your standing on) Resistance: the price level at which a stock or index will receive considerable selling pressure (should be thought as the ceiling over your head. All of these will help you spot entry and exit points, and initial stages of a breakout rally

Breakout: when a stock breaks through the resistance level More Chart Factors Breakout: when a stock breaks through the resistance level Broken Support: when a stock trades lower than the previous support level; supply bigger than demand which sends the stock or index lower which can create additional selling pressure

Trend Lines Uptrend Line: connect two or more low points in a chart with a straight line

Downtrend Line: connect two or more high points with a straight line