Technical Analysis

(A brief study in charting)
Technical analysis - also known as charting, is the study of price and volume behavior in financial markets to help investors or traders anticipate what is "likely" to happen to prices over time.


What is a stock chart?

A stock chart is the plotting of stock prices at specified time intervals over a specified range of time.

A chart, over time will form price patterns from the plotted stock price's highs and lows. When drawing a line to connect the consecutive lows, and consecutive highs, can show whether a stock's price movement is in a downtrend, uptrend or sideways price range.

Uptrend chart Downtrend ChartSideways price range

Support and resistance levels - When reading a stock chart, the support and resistance levels are where a stock's price will stop and reverse it's direction of movement. These levels are denoted by multiple touches of prices at the predetermined levels. (See chart image just below.)

What Is a Breakout?

A breakout is a stock price moving through support or resistance level with increased volume. When a breakout occurs, a trader can enter a bullish position after the stock price breaks above resistance or enter a bearish position after the stock breaks below support. Once the stock trades beyond the support or resistance level, the prices usually trend in the breakout's direction.

What is a Trend Reversal?

A Trend Reversal is a change of direction for a stock price that moves in the opposite direction, for instance, uptrends that reverse into downtrends and downtrends that reverse into uptrends.


Uptrend break