A common discussion point that I notice within the StockTwits streams is the topic of “what are you seeing in this chart?”. Since I believe that a great deal of chart reading can come down to interpretation, I thought I would do a little exercise within this point. Let’s look at a chart through several different lenses.
I thought I was use AAPL (Apple Inc.) as my example since I believe most traders keep an eye on this stock and/or have had some position in it at some point. Here is a plain vanilla Daily chart showing the volume, MACD, Stochastics, VaP (Volume at Price), & BB (Bollinger Bands). I have the 20, 50, 200 moving averages as well as the 10 day VWAP & 8 day EMA (Exponential Moving Average).
What do you see? What are the things that you look for? What sticks out at you, the glaring clues? Write them down before you read the rest of this post. Feel free to send them along to me, I’ll put together a follow-up post that shows all the different perspectives.
Now on to what I see. First off, I note the green volume bars as of late with a small rise this past week. Looks Bullish. I also notice the Stochastics reading in my Rocket Ship formation. Very nice indeed. The RSI reading is rising lending to great up movement in price this past week. I also notice the LARGE VaP bar at the current price level. This is a BIG clue for me for price action.
Now let’s put some Trend Lines on the chart. Currently the price is attempting a test of the Trend Line above after a big bounce near the 320 level this past week. Do you see the Lower Lows being made? What significance does that play, if any?
Now let’s look at a plain vanilla Weekly chart of AAPL.
I see a nice move to get back over the 50 day moving average this past week. I see a MACD that is drifting lower with some acceleration however. The Rounding Top pattern is more visible here, showing the Lower Lows being made.
What would you add here to get more clarity? More moving averages? Some Fibonacci lines?
For me, I do make it a habit to draw a chart using different perspectives. I believe it helps me to see the price movement on the chart with more clarity, instead of just seeing what I want to see.
Keep things in perspective by looking through as many lenses as you can. Happy trading.