Any trader has to make either of the three decision:
1. Should I buy this stock? OR
2. Should I sell this stock? OR
3. Should I just IGNORE it?
Now to make this decision, you need some visual aid which can tell you what the stock is doing right now? Is it getting trading interest? Are people enthusiastic about its future or totally indifferent? If the stock is not moving, where is it locked up? You need some idea, some visual tool.
That Visual tool is the Stock Chart. It tells you what exactly is stock doing right now.
Yes, Charts do tell all the above. What Chart does not tell: What it will do in the future. Having said that, it does drop big hints on what it wants to do
Example: Here's one stock chart
There are some simple observations one can make:
1. The stock has a well defined resistance of 530. It means every time stock climbs to that level it sells off. So, even if you buy that's all the maximum you can get for now.
2. Since Feb 2017: the stock has consistently bounced from 480 and hence one can rule out some buying near that level.
The stock seems trapped in a 50 point range with no clear trend. It does not look worthwhile playing this game and hence one should avoid the stock.
Now, this helps one getting unnecessarily trapped in a stock. Chart is a brilliant visual tool that can help one arrive at simple decision. Chart removes unnecessary belief bias one has by forcing you to the see the reality
Science of Stock Price Action
There is a logic that stocks follow when they make big moves. I have tried, to sum up, those concepts in a methodology called Science of Stock Price Action.
Do these concepts work all the time? Absolutely not. But when they work - they reward in a big big way. There are many factors at play primarily the overall market environment. The objective of my website is to put forward many Live case studies before you so that you can learn how these patterns work and why sometimes they fail too. The whole idea is to illustrate and make you understand the whole logic behind it.
If you find my work interesting - I will encourage you to buy the book and access Premium Case Studies. The idea is to demonstrate live how patterns unfold and work. They succeed, they fail but the whole process is real fun. I invite you to be part of it.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers