Charts and their Patterns
Technical analysts use charts to obtain historical information about
individual stocks and markets. On these charts, analysts study the
patterns to determine future trends, which will tell them when to
buy and sell. These analysts don’t have to know anything about
a particular company or business. The charts reveal all! Past price
movements and patterns are used to predict future price movements.
The popular types of charts used are
A line chart displays successive stock prices connected by a line
over time. For example, this type of chart shows hourly changes to
the Dow Jones Industrial Average (DJIA) in a day of trading and
the closing prices of a stock or the market over time. Figure 11–1
shows an example of a line chart with the closing monthly prices
of Amgen, Inc., for the months April 2005 through September 2006.
Line Chart for Amgen, Inc., Using Monthly Closing Prices from April 2005 through February 2006
It shows the historical price patterns for the company and, according to technical analysts, shows trading opportunities in the stock.
A bar chart displays successive high, low, and closing stock prices
over time. A bar chart is similar to a line chart, but it incorporates
more information. If charting daily stock prices, a bar chart includes
the stock’s high, low, and closing prices. A vertical line shows the
high and low prices, and a horizontal line shows the closing price.
Figure 11–2 shows a bar chart for the following daily prices for
Lack of Trading Plan