GLOW and my lesson for charting stocksI start by finding a point in the past, unless it's retail, I usually go back about 10 months roughly. Ideally, it's a point in time where the stock hit its lowest price. Retail is such a seasonal driven market that their corresponding stocks behave accordingly; spring time products' stocks, clothing and the Holidays, etc.
I like to draw a Begin Watch Vertical Line Marker - let's me know where in time I started watching the stock
From there, i'll use the Horizontal Ray tool and mark my lowest stock price and start "telling the story" of its ups and downs. I started my first Begin Watch Vertical Line Marker on 11/28/2016 and drew the red bottom price on that day. That is called the Support Line. Then the stock went up to $0.32 Resistance Line. All stocks want to break the resistance line (go past it) and then have that line be the new Support Line. This stock hovered between these two lines until 01/27 where it broke the resistance line. Once the stock settled and hit its high point, $0.35, that becomes the new resistance line. Five of the next 6 days the price was exactly $0.35!!! And, the stock bounced off $0.32 for those couple days, retesting!
***This becomes the importance of charting your stock***
***IMPORTANT Remember, investors will always look to the past to determine the price they are willing to pay!!! IMPORTANT***
Between $0.25 and $0.32 the stock hovered and the disparity in price needed a Mid Value Common Line at $0.28, started on 3/20; this is a great line that shows, through many many days, where the mid price of this stock stayed. Over and over again, the $0.28 Mid Line price became the Support Line and held true to this day. Then on 06/01, the $0.28 Support Line was tested again by touching it on the LOW of that day and off it went reaching up to $0.61, before settling with a new resistance level at $0.37! Thus, my Horizontal Arrow was drawn there in green, signifying the money potential. (I did not draw my line on the following day's bear candle because it opened there and did not hold.) 06/14 then saw a virtual repeat of 06/01 and a new resistance level! Plus, it retested the $0.28 price again!
From here, you can see where the stock wants to go because your drawn support and resistance lines paint the chart to help determine future price. Add the volume equation; is the volume overwhelmingly bear or bull? This aids in determining the bear or bull trend. What will the stock price be for a possible buy once the bear volume subsides? Never buy until there is a trend reversal with a confirmation Buying Signal.
Buying Signal - green bull candle, followed by another green bull candle with higher close + Increasing bull volume
***IMPORTANT Remember, investors will always look to the past to determine the price they are willing to pay!!! IMPORTANT***
REGARDING the RSI - I will defer to a more knowledgeable investor to help explain/understand the RSI indicator (Relative Strength Indicator)
If you've read this far, I really appreciate your time and I really hope you find this useful as you navigate through your own stocks. This stuff is fun, and serious money is made utilizing these tools! Major investors follow charts and make their plays accordingly!
