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Kinds of Stock Charts 2

What’s Wrong with Line Charts

Line Charts   

Fig 1.3 Click to Enlarge. Chart courtesy of StockCharts.com

As was mentioned before, chartists almost never use line stock charts like the ones shown before and in Fig 1.3 above—it was only used in this intro for simplicity’ sake.

Remember how a stock’s price could go lower or higher than the closing price before it closes, but the chart wouldn’t show it? That’s the problem with line charts; they only show closing prices, not highs and lows.

To get more information, most users of technical analysis use either bar charts or candlestick charts, which are simply different ways of showing stock prices. Bar and candlestick charts are more accurate because they visually represent the close, the high and the low, making them superior stock chart formats.   Continue reading to learn more about bar and candlestick charts.

● Bar Charts

Introduction to Bar Charts

Bar Charts   

 Fig 1.4 Click to Enlarge. Chart courtesy of StockCharts.com

Fig 1.4 above is a simple example of a bar chart for Sun Microsystems (SUNW). Pretty much all bar charts will look like it.  On left is an enlarged bar showing its properties. As you can see, if the lower horizontal bar is facing left, and the upper horizontal bar is facing right, then it’s an up bar; the inverse would be a down bar. As you can tell, you don’t need to look at the detailed price information at the top to see highs, lows, etc. because the bars themselves show them. However, it’s still useful to have the detailed price information available because sometimes it’s difficult to eye up the exact numbers.

Let’s take an even closer look at the stock chart above to review what we’ve already learned. If you look at the upper left corner of the chart, right below the “Sun Microsystems, Inc.” label, you’ll see the words, “SUNW daily.” That is the timeframe, in this case daily, meaning that each bar on the chart represents one day.

If you look at the far right of the chart you’ll see the last bar highlighted in yellow which corresponds to March 14th’s stock prices. You’ll notice that the bottom horizontal bar is facing right, and the above one left. That means March 14th was a down day, i.e. SUNW finished at a lower price than it opened. The upper horizontal bar is the opening price, and the lower horizontal bar is the closing price. If you’d like the precise numbers for the high, low and close, you can still refer to the detailed price information at the upper part of the chart: On March 14, 2002, SUNW opened (O) at $46.12, had a high (H) of $47.38, had a low (L) of $43.38 and closed (referred to as “last” when it’s the last bar on the chart) at $43.69.

Helpful Hint: Change (chg) refers to the difference between yesterday’s closing price and today’s, not the difference between today’s open to today’s close.

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