Charting Basics:
Forgive this intrusion to the general post content.
Print out a few daily charts of your favorite tickers. Pick a high point somewhere in the middle of the chart that is followed by a long decline, and, using a ruler, connect a straight point to the next significant high point (a couple of weeks out without passing through any other high point. Draw this line until it passes through a reversal - doesn't matter if it lasted very long or not. At the point where it passes through and the tick starts up again, start with that day's low and connect a straight line through any lows that touch it on the way up until you get to another reversal where the ticker starts going down again for several days. Now, there will be many days where the highs dont touch the line on the way down, and the lows don't touch the line on the way up. However, this will give a simplistic view of whether the ticker is in an upswing or downswing. If it goes level for a period after the crossing, just ignore that and draw the line where the reversal starts up or down again.
I know this is probably a poor explanation, but email me if you need and I will make a chart that illustrates (specify Mac or PC and JPEG, GIF or BMP please). Now you can also make a parallel line to either the up or down swing lines that 'bands' or channels the range in which the stock trades. For highly volatile stocks, this doesn't work very well. The point is this, for the most part, one can profitably trade when the stocks are going up and down (by shorting) with a fair idea of where the local minimums and maximums are with this method. It will tell you when a stock has probably peaked, and when its due for a reversal. It also helps to know the 52 week high and low so that you know where the present price is in relation to its range. If its too close to the high, then its not very likely that it will create a new high. If its made a 25% gain recently, then its also not likely to continue at that rate. For drops, the corollary is true. Remember, these are general rules, not absolutes. Its crude, but if you do it enough, you will get to the point where you can just look at the daily chart for any stock and decide where its heading and whether its worth watching for movement. Once you master that, and you can tell if you have by noting where you think a ticker will go tomorrow for a few days in a row, then you can start looking at the effects/relationship of volume and news and market changes to those movements. Once you sort that out, then you can move to the intraday patterns, which are very similar, except you get to lose money in real time...
Hope this helps.
lastshadow |
