On this post we will give a guide how you can tell if the stock price is in uptrend using price chart.
But before that, we will cover first how to read or interpret OHLC or Bar Chart. We will use this kind of chart because it very easy to understand.
Bar charts are some of the most popular type of charts used in technical analysis. As illustrated on the left, the top of the vertical line indicates the highest price a security traded at during the day, and the bottom represents the lowest price.
The closing price is displayed on the right side of the bar and the opening price is shown on the left side of the bar. A single bar like the one to the left represents one day of trading.
If the line is RED, if means stock was down for that day. It means the closing price was low compare to it’s opening price.
On the good side, if the line is GREEN, it means it was up for the day. The closing price was higher than its opening price.
Now your question is, using Bar chart, how can I determine if the price is in up trend?
Below are the two things to consider:
- Higher Highs – when the highest price of today is higher than the higher price of the past few days. A series and higher high is indicator that the stock is doing great.
- Higher Lows – this is the next things to consider. When the lowest price of today is higher than the previous lowest price. This is additional confirmation that the stock is doing great and continue to goes up.
HINT #1: If you have higher highs and higher lows for the three consecutive days, it is not necessary that the Day 4 will deliver also the higher highs and higher lows. Stocks did not move in straight line. You have to remember that. And you have to consider that when buying stocks.
HINT #2: You can also use this to weekly and monthly month.
To better illustrate the higher high and higher low, consider the example below:
The higher highs and higher lows was clearly illustrated in the above example. I have put it in a circle to better explain.
Now, let’s apply it to the real world. Take a look some chart below to prove that it is working.
Above is a ABS 5 year weekly chart. If you will look at the chart, you can see that the price is an uptrend if they have higher highs and higher lows.
Take a look another example, below is SM 5 year weekly chart. Almost the same are saying when they have higher highs and higher lows, and it is an uptrend price.
To your next winning stocks,