Technical Stock Analysis

When selecting stocks, fundamental analysis is important, but there’s more to it than that. Stocks trade based on what the future holds (or is expected to hold), not on last quarter’s financial results. A stock’s share price reflects the future prospects of and expectations for the company.

But stocks also have memories. The stock market is simply a collection of investors who buy and sell stocks. These investors remember a stock’s past, which influences their buying and selling behavior.

This is where the technical analysis of stock trends comes into play. It can be a powerful took to identify trend reversals and entry and exit points. The best way to analyze the trading pattern of a stock is to look at its chart. We wouldn’t recommend a stock in any of our newsletters without analyzing its chart first!

As you read Cabot newsletters and listen to investing news, you will probably hear terms like ‘head-and-shoulders pattern,’ ‘trendline,’ ‘support and resistance,’ ‘double top’ or ‘double bottom,’ “triangle,’ and ‘gap.’

Understanding these basic formations and how to read stock charts will make you a better, more profitable investor. Timing is everything, and even a basic understanding of technical analysis will greatly improve the timing of your entry and exit points. And that can be the difference between a successful and a failed investment.

No technical indicator or system is perfect. There will be times when the signal that is given by the charts turns out to be wrong. But in most cases, when technical stock analysis leads you to a certain conclusion, the stock will behave in a way that is similar to what would be expected.


Technical Stock Analysis terms you need to know:

Why Volume on Stock Charts is a Vital Indicator

Large increases in volume are your first clue that institutional investors are jumping onboard.

A Stock's Trading Volume Can Indicate Where it is Headed

Here are four trading volume indicators to keep in mind when you’re buying or selling a stock.

Tight Trading

When you see tight trading in a volatile growth stock after a big run-up, it's almost always a bullish sign.

Support and Resistance

Support is a price at which buyers step in and arrest a decline and resistance is the inverse of support.

Gaps

Gaps occur when a stock begins a new trading day at a price that’s vastly different from the previous day’s closing price.

Stock Trends

Trendlines help you determine the prevailing trend of a specific stock or the general market.

Triangles

Triangles usually occur when a stock gets ahead of itself and temporary consolidation is necessary.

Head and Shoulders

The "head-&-shoulders" pattern is one of the most common and reliable of all the reversal patterns.

Getting Started in Stock Chart Reading

Mike Cintolo suggests looking at just four chart readings regularly.

Double Tops and Double Bottoms

A double top occurs when a stock attempts to break out above a recent peak but fails.

Chart School: Learning to evaluate a stock's chart will improve your selling.

Mike Cintolo uses three stocks' charts to illustrate how you can improve your selling.


Stock Picks

Tesla Motors

If Tesla ever begins to cut back on development and innovation costs, earnings will soar.

Alibaba

China seems to be raising up its very own version of Amazon in Alibaba (BABA.

Facebook

Roy Ward uses the PEG ratio to determine if the stock is undervalued or overvalued.

Cabot Wealth Advisory

Three Vital Tips for the Chinese Stock Market

By Paul Goodwin on September 30, 2016

As U.S. stock markets continue to drag, the Chinese stock market is an ideal alternative for growth investors. Here's how to find the best Chinese stocks.Read More >

What Fed Speeches Mean for the Stock Market Today

By Chloe Lutts Jensen on September 29, 2016

Four Fed presidents gave speeches yesterday, and every word was digested by the stock market in an attempt to better predict the Fed’s next move. With odds of a December rate hike now about even, how should stock investors prepare?Read More >

The Emerging Market Stock You Ought to Own

By Paul Goodwin on September 27, 2016

The company I’m talking about (the one that you probably don’t own) is the largest Chinese instant messaging company. It is a giant in its own right, with a market cap of $262 billion and annual sales of over $19 billion. The company grew revenue by 28% in 2015 and routinely boasts after-tax profit margins over 30%.Read More >