Charting Stocks For Dummies Part 6

In this edition of ‘Charting Stocks for Dummies’ we are going to look at a stock chart I tweeted yesterday, which resulted in a nice 5% move the next day.

Remember that these case-studies are to see if stock trading can really be this easy.

While you might not always see such immediate results, the answer is yes! Technical analysis allows us to execute trades only when a stock has made some sort of confirmation. This drastically reduces the risk of trading.

You can see the below and after charts below…

Before

In the before chart, we are looking at China Sunergy (CSUN) retreating after topping out at $5.20. As marked by the green line, what was once resistance is now ready to be tested as the stock’s support for the first time.

From this point there are two options that could happen:

1. The stock dips below the green line, which ruins the trade.
2. The stock bounces off the green line and jumps higher.

Some other great indicators from this chart are the relative strength index (RSI) and MACD. The RSI is dangling around 50 (neutral zone), while the MACD is also in a neutral zone at its crossing point.

After

Hopefully by looking at the “after’ chart you can tell that the stock did indeed bounce off the support and head higher. We can also see that RSI increased and the MACD broke its current downtrend. Both of which are bullish signals.

So there you have it. By using the support we were able determine whether or not the current trend of China Sunergy was done or not. To learn what to do with this stock at this point and other technical patterns and indicators check out Chart Pattern Manifest.