Charts are very important fundamental tools used in share investing. Being smalltime our funds are limited and holdings are puny when compared to the big boys but still it is our precious treasure and want to see it grow hence it is our own duty to educate ourselves in order to safeguard our investment and being able to interpret a chart can mean a lot of difference between making an informed decision or throw caution to the wind and depend on luck.
I have used charts for a number of years and I would say a good number of times it has saved me from seeing total destruction of my treasure, more recently the case being my investment in China Aviation Oil which I sold off my position 1 month before it totally "tanked".
For the charts below I am using City Development as our illustration
Moving Average Chart Moving averages tone down the fluctuations or "noise" of stock prices into a smoothed out trend. It is constructed by totaling a set of data and dividing the sum by the number of observations. The resulting average, when plotted, will give the moving average line.
Generally, bullish signals are generated when the moving average is rising and bearish signals are when the moving average is falling. Also, a bullish signal is generated when the price closes above the Moving Average while a bearish signal is generated when the price closes below the Moving Average.Volume ChartThis chart indicates the volume transacted each day over a period of time. It is usually displayed with the closing price chart. Chart readers generally pay close attention to periods when large volume are transacted as these suggest strong market forces which can determining the direction of movement of the stock.
MACD Chart Moving Average Convergence DivergenceMACD is a chart which is derived by dividing one moving average by another. When the two moving averages cross and fall below the horizontal equilibrium line, this is a bearish signal; vice-versa for a bullish signal. Buy and sell signals are also generated when there is a crossover between the 2 moving averages. A crossover up is a bullish signal & a crossover down is bearish.
RSI Chart Resistence Strength IndexRSI is a momentum indicator that measures the relative strength of a stock against itself. Whenever the RSI moves above the 70 level, it is considered "overbought" and when the RSI hovers at 30 or below, it is considered "oversold".
High Low ChartThis chart shows the full trading price range over a period of time. The vertical line drawn on each day shows the trading range for the day. Common usage of the chart is to identify gaps - when two consecutive bars do not overlap one another (i.e. the highest of day n is lower than the lowest of day n+1, or vice versa).