Reading Stock Charts Using Technical Analysis

by The Smarter Wallet on July 8, 2009

So far, some “predictions” we’ve made about the stock market seem to be coming to fruition. These theories suggested the possibility that the stock market would eventually reverse its rally soon. We talked about it in the following posts where we presented analytical commentaries on the market based on a few educational stock trading videos by

While I’m not so big on market timing, I’ve been recently educating myself about the world of active traders and stock trading as a way of getting a better grasp on stock technical analysis, which is one of the schools of thought that’s widely followed by investors and traders alike. Here’s where I’d like to go over why traders are now thinking that the stock market may be vulnerable to further slides. Technical analysts have been predicting for a while now that the S & P index (representing the stock market) is bound to enter a new downtrend, and it seems that its recent behavior over the last couple of weeks is affirming some of these calls.

Is The Stock Market Headed Lower?

Here are some big questions that have crossed the minds of those eagerly watching the market: could the index be suffering from a momentary correction or is this the start of something bigger and more unpleasant? Is a major downtrend beginning to develop?

Before I get into the nitty gritty of technical indicators that support the hypothesis of a downtrend in the works, I have to emphasize this caveat: technical analysis indicators are helpful about giving you probabilities about things that could happen, but they won’t give you definitive predictions — nothing can. In other words, there is no system out there that can give you a 100% guarantee on where the stock market is headed.

It’s important to remember that the current slump we’re seeing today is a function of the fundamental economic atmosphere we’re presently experiencing. If it were not for rotten job numbers coming out the other day, I wouldn’t think that we’d be witnessing the kind of market shakeout and volatility that we’re seeing now. It just so happens that the economy continues to suck thereby causing the markets to suck along with it. Analyzing a stock chart full of technical indicators can’t predict such behavior 100%, they can only give you probabilities based on current market sentiment. I liken technical analysis to the methods used to predict the weather. They’re not right all of the time. That said…

Let’s Read Some Stock Charts Using Technical Analysis!

Let’s now enter the world of technical analysis by viewing the following interesting video by It is meant to show you how traders read stock charts using various indicators and tools in order to try to forecast where the S & P is headed next. In this case, the S & P is looking weak and appears to be headed into more negative territory.

Click on this link or the image below to watch the video:

S & P correction, reading stock charts, technical analysis

The video shows a technical analyst and experienced trader using the MarketClub stock trading tool to interpret the S & P stock chart (you can sign up to use MarketClub for a fee). The analysis includes:

  • Reviewing the 200 day moving average vs the 50 day moving average for the S & P index.
  • Interpreting Doji lines (Japanese candlestick charts).
  • Covering the MACD indicator.
  • Charting Parabolic Stop and Reverse lines.
  • Using Fibonacci retracement lines and trend lines.

If this looks fascinating enough to you, and you’d rather check out some free tools and materials from INO, you can subscribe to their free Trends Analysis tool and their no cost investment and trading video channel called INO TV Free, which are all available at zero cost and with no obligation.

Are you ready to see how this market unfolds?

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