Chart Talk

Practically anything we do requires us to look before acting, Awareness of your surroundings in all instances can mean the difference between making a sound decision and a needlessly risky one. An NFL quarterback must not only read the defense before calling a play but must also know where his receivers and blockers are in order to properly execute. A mountain climber making a careful descent down a steep rock face needs to know precisely where each next step will be before taking it, or else risk catastrophe. We're taught at an early age to look both ways before crossing the street. And we most certainly cannot make a trade without first studying the chart in order to understand where the best point of entry exists, provided one exists at all. There are a variety of trading styles and therefore no single way of approaching a trade. However, one of the most reliable approaches involves buying support and selling resistance. As we've discussed previously and repeatedly, support ...

Stock market "experts" are a-dime-a-dozen, and a good many of them don't even trade and barely invest. Chances are, you know exactly the type. Hindsight Millionaires is what I like to call them, and the world is full of them. They're way too eager to share what they would have done, or what you SHOULD have done in order to make a killing in the market. "You could have made a fortune today if you had just gone short on the open and walked away until the close," some nudnik once told me. Ya think? Thanks pal, so how did you  do going short on the open and walking away? Crickets. But there is something to be said for being able to examine stock charts and recognize the formations that could have tipped you off to why the market made the moves that it did. While hindsight won't make you a millionaire, it can add clarity to the markets, which will help you in planning trading strategies that lead to future profits. No trader is infallible and we're eac...

Like any good metaphor, the classic trope one man's ceiling is another man's floor is loaded with meaning.  Depending on how you unpack it, it might be teaching us to always be aware of our surroundings, to be respectful of others, to avoid rushing to judgement, or to understand that we don't all excel at the same things and in the same ways, among many other pearls of wisdom. We can easily apply any interpretation of this saying to the stock market, especially if we consider the idea that one day's support is another day's resistance . Indeed, an area we would have bought on one particular day, might become an area we'd sell in the near future. Take the United States Oil Fund ETF USO , for example, which tracks the movements of the crude oil markets. USO went from a low of around $65, right before Russia invaded Ukraine on February 24th, 2022 and ran all the way up to $87.84 on March 8th, stoked by rising gas and oil prices as a result of Russia's attack. ...

When it comes to the stock market, birds of a feather certainly flock together. Under most circumstances, stocks in the same sector will move in very similar ways. For example, energy stocks will trade according to the more volatile oil markets (which often will be in the opposite direction of the greater stock market), while mining stocks will move with silver and gold, and consumer stocks will be more in-step with the larger economic climate.  Take a look at charts for any two stocks from the same sector, whether it's two financial stocks, two retail stocks, or even two index tracking ETFs such as the SPY and the DIA, and you'll notice very similar, if not identical, patterns. Even when significant information, such as an earnings report, irrationally skews the trajectory of a particular stock in one direction or the other, other stocks from the same sector will tend to move in sympathy with that stock, at least until the market normalizes somewhat. However, what's good f...

You know you've immersed yourself in trading when you see chart patterns everywhere you look, and in the unlikeliest of places. To me, the ways in which items are arranged on a grocery store shelf sometimes resembles a stock chart. When I drop my kids off at school, and I see them lined up with their peers to go into class, I can't help but notice "support" at their feet and "resistance" at the head of the tallest kid in the line. The panorama of a city skyline from left to right might as well be the chart for a publicly traded company that has rallied, consolidated at the top, and is beginning a sell-off. Even the step counter on my iPhone, with its colored bars of varying heights lets me know if I'm long or short a good health habit. I wouldn't say I'm obsessed with the markets   (then again one who claims to not be obsessed often is). I'd just say I'm usually tuned-in to trading so much so that I tend to relate it to the world aroun...