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What I love about technical analysis and using stock charts, to make good trades, is that it is very easy, yet accurate to use. In just mere seconds, a good technical trader can tell whether or not the stock is in play or not. Should we go long or short?
The key to good and fast stock charting is knowing what to look for. What are your favorite patterns, tendencies, and/or indicators. In other words, what does the chart need to show you to get you interested in the stock? What is your setup?
Once you know what you are looking for, perusing through the results of a technical scanner or your watch list should be extremely easy and just take a matter of minutes.
Below are my favorite stock chart setups
The Pullback – This setup allows you to take part in a stock after a breakout has already occurred. It protects the trader from buying at the top of the breakout and provides a less-risky entry. Read more about pullbacks.
The Wedge Breakout – This trend captures a stock that has continually failed to break its resistance before bottoming out in the short-term. Also creates a reliable price target. Read more about wedge breakouts.
The Consolidation Breakdown – Stocks move in 3 directions – up, down, and sideways (also known has consolidation). When in a state of consolidation, the stock is generally regarded has having no trend. Meaning it could go either way (up or down). Attach a resistance or support, and a simple breakout or breakdown can be captured. Read more about consolidation breakdowns.
The 200-day Moving Average – Essentially traders use various moving averages depending on their own individual time frame; however, all traders consider the 200-day moving average to be a good indicator of the stock’s long term potential. In this same manner, stocks can make some big runs when they finally move above, below, or bounce off a 200-day moving average. Read more about 200-day moving average.
The Tendency Play – Sometimes traders just need to ignore all the “text-book” plays and go with what their eyes are telling them. All stocks have different tendencies and reaction to different events. By studying how individual stocks move, we can capture odd moves other traders might not notice. Read more about tendency plays.
The Channel Breakout – When a stock is in a steady trend (up or down) eventually it will break and the trend will reverse. This simple pattern looks to capture those breakouts into nice little profit makers. Read more about channel breakouts.
What are your favorite stock chart setups? Leave a comment below.
Fallen in love with technical analysis yet? Learn more stock charting setups and tips over at Chart Pattern Manifest.