A stock chart, particularly a candlestick chart, can tell you whether institutional investors and other big investors are heavily buying a stock or dumping it as fast as they can.
Traders can also use stock charts to tell if a stock is likely to keep bumping its head against a ceiling of resistance, or if it will find a floor of support from which it can continue jumping higher.
The other important thing to understand about charts is that they help you see what is really happening with a stock. Savvy investors use charts to spot anomalies and patterns, and to make wise decisions when buying or selling stocks. Charts help you spot timely sell and buy signals, and to analyze the health of a stock.
Bottom Line
There’s no doubt that learning to read stock charts can be daunting for some beginner traders. However, all it takes is some basic tips and continued practice to learn how to read them.
Once you do that, you will be able to utilize charts to find the best stocks to buy and spot the right time to sell.
In short, the combined information of a stock chart allows investors to make informed decisions as to whether to ignore, sell, or buy a stock.