charts in technical analysis

Charts in Technical Analysis

Aju Joy

Points to remember

• Charting represents a key activity in technical analysis.

• It is the security prices that are charted• Prices are volatile• There are four prices:• High, low, closing and opening price• By far closing price is the most important,

because it is used in most of the analysis

Types of charts

• Line chart• Bar chart• Japanese candlestick chart

Line chart

• Simplest price chart• Closing prices are charted on the

graph in a daily basis.• Each closing price would be

represented by a point on the chart.

• All these points would be connected by a straight line which would indicate the trend of the market.

1-month line chart of Exxon-Mobil Corporation.

Bar chart

• Most popular chart used by analysts• In this chart the highest, lowest and the

closing prices are plotted on a day to day basis.

• A bar is formed by joining the highest and lowest price of a day by a vertical line.

• The top of the bar represents highest price• The bottom bar represents the lowest price• A small horizontal hash on the right hand side

is used to represent the closing price• And the opening stock is marked by a hash on

the left hand side.

6-month bar chart of Citigroup using the arithmetic scale, where the gridlines are equally spaced and

represent the same price increments.