Reading a stock chart

A chart is a record of what buyers and sellers already did. It cannot tell you what happens next. It does show whether a stock is rising, falling or going sideways.

One candle, four prices

Each candle covers one period. The open is the first trade and the close is the last. The high and low are the extremes in between. The thick body runs from open to close, usually green when the close is above the open and red when it is below. The thin lines above and below are the wicks.

Example: a daily candle opens at $50, trades up to $53, dips to $49 and closes at $52. The body is green from $50 to $52. The upper wick runs from $52 to $53, the lower wick from $49 to $50. Buyers won the day, but sellers took back $1 before the close.

Timeframes

One stock can be drawn with a candle per minute, day or week. On most chart sites, a daily candle covers one regular session, 9:30 AM to 4:00 PM ET. Match the timeframe to your plan. Day traders often watch 1 or 5-minute candles, swing traders daily, and long-term investors weekly, which smooths out the noise.

Volume

The bars along the bottom show volume, the number of shares traded in each period. If a stock averages 2 million shares a day and trades 6 million today, that is 3 times normal. Many traders trust a breakout, a push above a recent high, more on heavy volume.

Trend: higher highs, higher lows

Look at the swing points, the peaks and valleys. Peaks at $40, $44 and $47 with valleys at $36, $39 and $42 is an uptrend, because each high and each low beats the one before. Lower highs and lower lows is a downtrend. Level highs and lows mean a sideways range.

Support and resistance

Support is a price area where buyers stepped in before. A stock that bounced near $100 three times has support around $100. Resistance is where sellers showed up, such as a stock that stalled near $120 twice. Treat both as zones, not exact lines. Levels break often, and trading can lose money even when a chart looks clear.

Moving averages

A moving average is the average closing price over a set number of days, recalculated daily. If the last 20 closes add up to $2,000, the 20-day average is $2,000 divided by 20, or $100.

• 20-day: about one month of trading. The short-term trend.
• 50-day: about ten weeks. The medium-term trend.
• 200-day: about 40 weeks. Price above a rising 200-day is a common rule of thumb for a long-term uptrend.

The Markets board, column by column

Column	What it means
Price	Price as of the update time at the top of the page
Day	Percent change from the prior session's close
Off high	Distance from the 52-week high. -8% means 8% under the peak
vs 50d, vs 200d	Percent above (+) or below (-) each average
RSI	14-day relative strength index, 0 to 100. It compares the size of recent gains with recent losses. Above 70 is often called overbought, below 30 oversold
60 days	A small line chart of the last 60 daily closes
Read	A label from fixed rules, such as Near highs (within 5% of the 52-week high) or Below 200-day. Dip labels follow the dip-buying lesson. A description, not a recommendation

The board uses simple averages of daily closes. The 52-week high is the highest daily high over the past year.

Try this

Open the daily chart of one Markets board name on any free chart site. Add the 20, 50 and 200-day averages. Write down whether it is making higher highs and higher lows, where the nearest support and resistance sit, and whether price is above the 200-day. Compare your notes with the board's Read column, then look again in a week.