An Introduction to Stock Charting

Leonard Lardaro
Department of Economics
University of Rhode Island

 

  
 

 

All of the charts on this web page were generated using stockcharts.com.

The first set of graphs are of the Financial Sector Select SPDRs (symbol XLF). In the first graph, consider where to place appropriate trend lines. Are there any two-line patterns here?
(note: the Annotation Tool at the bottom of the graph was used to create the lines and add comments)

 

  
 

 
   

 

 

 

 

  
 

 
   

 

 

 

 

 

  
 

 
   

 

 
What is support? Resistance?

Draw the support and resistance lines in this weekly graph of the Financial Select SPDR's

 

  
 

 
   

RESISTANCE
A price at which selling pressure is greater than buying pressure, causing price to fall (supply exceeds demand, causing a decrease in price)

SUPPORT
A price at which buying pressure exceeds selling pressure, leading to a rise in price (demand exceeds supply, causing an increase in price)

Sometimes, after a breakout has occurred (once the resistance level has been breached), prior resistance becomes support. This also holds for a breakdown from support.
 

 

 

 

 
 
 
The daily graph of XLF above indicated a possible significant change. In cases like this, it is appropriate to examine an intra-day chart. The 30-minute chart of XLF is given below. Add relevant trend lines and show short-term resistance.

What direction do you expect XLF to move in?  Why?
(Hint: this is where the economics comes in)

 

 
   

 

 

 

 

 

  
 

 
   

 

 

 

 

 

  
 

 

MOVING AVERAGES IN CHARTS

  
   

 

 

 

 

 

  
 

How to use charting AND economic theory to predict likely future changes (i.e., short-term forecast)