| eturn that a stock can provide is often predicted | | | | large price spread and the position of the side bars |
| with the help of technical analysis. Stock market | | | | shows whether the price rose or dropped and also |
| trading tips are based on technical analysis of various | | | | the spread between opening and closing prices. |
| parameters. | | | | A variation on the bar chart is the candlestick chart. |
| Stock market analysis is science of examining stock | | | | These charts use solid bodies to indicate the variation |
| data and predicting their future moves on the stock | | | | between opening and closing prices and the lines |
| market. Investors who use this style of analysis are | | | | (shadows) that extend above and below the body |
| often unconcerned about the nature or value of the | | | | indicate the highest and lowest prices respectively. |
| companies they trade stocks in. Their holdings are | | | | Candlestick bodies are coloured black or red if the |
| usually short-term – once their projected | | | | closing price was lower than the previous period or |
| profit is reached they drop the stock. | | | | white or green if the price closed higher. Candlesticks |
| The basis for stock market analysis is the belief that | | | | form various shapes that can indicate market |
| stock prices move in predictable patterns. All the | | | | movement. A green body with short shadows is |
| factors that influence price movement – | | | | bullish – the stock opened near its low and |
| company performance, the general state of the | | | | closed near its high. Conversely, a red body with |
| economy, natural disasters – are supposedly | | | | short shadows is bearish – the stock opened |
| reflected in the stock market with great efficiency. | | | | near the high and closed near the low. These are only |
| This efficiency, coupled with historical trends | | | | two of the more than 20 patterns that can be |
| produces movements that can be analyzed and | | | | formed by candlesticks. |
| applied to future stock market movements. | | | | When glancing at charts the untrained eye may |
| Stock market analysis is not intended for long-term | | | | simply see random movements from one day to the |
| investments because fundamental information | | | | next. Trained analysts, however, see patterns that |
| concerning a company's potential for growth is not | | | | are used to predict future movements of stock |
| taken into account. Trades must be entered and | | | | prices. There are hundreds of different indicators and |
| exited at precise times, so technical analysts need to | | | | patterns that can be applied. There is no one single |
| spend a great deal of time watching market | | | | reliable indicator, but these stock analysis methods |
| movements. Most stock tips and recommendations | | | | when taken into consideration with others, investors |
| are based on stock analysis methods. | | | | can be quite successful in predicting price |
| Investors can take advantage of these stock | | | | movements. |
| analysis methods to track both upswings and | | | | One of the most popular patterns is Cup and Handle. |
| downswings in price by deciding whether to go long | | | | Prices start out relatively high then dip and come |
| or short on their portfolios. Stop-loss orders limit | | | | back up (the cup). They finally level out for a period |
| losses in the event that the market does not move | | | | (handle) before making a breakout – a sudden |
| as expected. | | | | rise in price. Investors who buy on the handle can |
| There are many tools available for stock market | | | | make good profits. |
| technical analysis. Hundreds of stock patterns have | | | | Another popular pattern is Head and Shoulders. This is |
| been developed over time. Most of them, however, | | | | formed by a peak (first shoulder) followed by a dip |
| rely on the basic stock analysis methods of 'support' | | | | and then a higher peak (the head) followed again by |
| and 'resistance'. Support is the level that downward | | | | a dip and a rise (the second shoulder). This is taken |
| prices are expected to rise from, and Resistance is | | | | to be a bearish pattern with prices to fall substantially |
| the level that upward prices are expected to reach | | | | after the second shoulder. |
| before falling again. In other words, prices tend to | | | | Other Stock Market Analysis Methods |
| bounce once they have hit support or resistance | | | | Moving Average - The most popular indicator is the |
| levels. | | | | moving average. This shows the average price over |
| Stock Analysis Charts & Patterns | | | | a period of time. For a 30 day moving average you |
| Stock market analysisrelies heavily on charts for | | | | add the closing prices for each of the 30 days and |
| tracking market movements. Bar charts are the most | | | | divide by 30. The most common averages are 20, |
| commonly used. They consist of vertical bars | | | | 30, 50, 100, and 200 days. Longer time spans are less |
| representing a particular time period – weekly, | | | | affected by daily price fluctuations. A moving |
| daily, hourly, or even by the minute. The top of each | | | | average is plotted as a line on a graph of price |
| bar shows the highest price for the period, the | | | | changes. When prices fall below the moving average |
| bottom is the lowest price, and the small bar to the | | | | they have a tendency to keep on falling. Conversely, |
| right is the opening price and the small bar to the left | | | | when prices rise above the moving average they |
| is the closing price. A great deal of information can be | | | | tend to keep on rising. |
| seen in glancing at bar charts. Long bars indicate a | | | | |