As a person that spends a great deal of time studying charts, I continue to believe in the importance of viewing stocks in different timeframes. I have posted several posts previously addressing this, and wanted to show yet another example of why this is so critical for trade entry. In the following Quarterly chart of PM (Philip Morris Int) you can see a Shooting Star candle forming:
This candle forming for the current quarter signals a Trend Reversal that is Bearish (in an uptrend at the moment). but would require confirmation from the next quarter that the trend has reversed.
The volume does look ok here but what is really happening with PM? Let’s take a look at the Weekly chart:
As you can see, we have another Trend Reversal candle forming in an Inverted Hammer. However, this is Bullish in that the current trend here is Down.
So how can we get clear this picture up? Let’s move on to the Daily chart to see if we get a better view:
Here we see the price attempting to hang on to the 50 Day Moving Average for dear life. The largest Volume at Price bar is at the level just above so we are seeing some weakness here. You do not see the weakness when just looking at the Weekly chart.
What we can get from reviewing all 3 charts is this: the stock is pulling back and is trying to find good support. But by looking at the Quarterly one can see that the stock has likely topped in this quarter and could:
1) consolidate for a while (digest recent gains)
2) fail to hold the 50 Day Moving Average on the Daily chart and pull back further
3) test the rising 20 Day Moving Average from below on the Weekly chart
Remember, when looking at the action in a Quarterly chart, that action is built from the candles within a Monthly chart. The Monthly chart candles are built from the action within the Weekly, and so on.
Broaden your horizons, expand those timeframes. Make sure you have the whole picture, not just the one you like.