How to Read Stock Market Charts

The ticker symbol that identifies a stock is printed at the upper left of each stock chart. To the right of the ticker symbol or on the next line is additional information:

• The chart frequency, such as daily or weekly
• Date the stock chart was made
• The last price the stock traded at
• Price change
  
• Volume of shares traded

You will also see the moving average, which is the average price of the stock over a specified time period, such as the previous 30 days. The moving average is indicated by the letters MA followed by the time period in parentheses.

The central part of a stock chart contains a graph composed of vertical lines. Each line represents the price range for one day. The top of the line shows the high and the low for that day. These lines are color-coded. For example, black means the price went up and red indicates the price fell. A line graph also appears in the center of the chart. This graph shows average prices. If it is pointed toward the upper right of the chart, the price is trending up. If the line graph points toward the lower right, the stock price is in a downward trend.

Support and resistance result from changing demand. Investor demand tends to drive stock prices up. Strong selling pressure pushes prices down.

Price supports. Sometimes a chart shows the stock falling to a certain price and then rebounding, only to drop back to the low price again. The low price is called a support. Investors view price supports as signals that investor demand becomes strong enough to push the price back up as it approaches the support level.

Price resistance. A stock price may climb to a certain price level, drop back down and then approach the same price again. When you see this pattern, it indicates a price resistance. Stock traders say selling pressure becomes strong enough as the price increases to halt the climb.

When a stock price pushes through a resistance or support level, it is called a breakout. Breakouts often indicate a significant price movement is starting.

At the bottom of each stock chart is a bar graph of the stock's volume of shares traded. The height of each bar shows the volume for one day. Trading volume can provide clues to price changes. For example:

• When a stock is in an upward trend or a downward trend and volume is increasing, the trend will probably continue.
• When trading volume is decreasing, an upward or downward trend may be petering out.
• A spike in trading volume of four times or more of the average daily volume may signal a reversal of the existing price trend is about to occur.