Application of Technical Analysis

Stock charts us a lot about what companies are doing, what they will be doing and what the markets thinks of it all. However, we have to learn how to read the stock charts. At the most basics level, there are some important concepts that should be kept mind:

• Uptrends are characterized by rising bottoms on the stock chart and can be described as periods of optimism.
• Downtrends are characterized by falling tops on the stock charts, and can be described as periods of pessimism.
• Abnormal trading activity often signals significant fundamental change in the company’s business.
• Support is a floor price that the market has shown an unwillingness to trade under in the past.

Resistance is a ceiling price that the market has shown unwillingness to trade above in the past.