Shares : Chart Pattern Part 1



Based on request, not all of us would know how to read financial statement or annual report from the Corporate, after all, it is full of figures and amount everywhere. For those who know how, it is a plus for them.  With the financial statement, though it would not translate the meaning of the shares prices up and down, it is certainly safer for investors to invest a profitable corporate much more worth then invest a net-loss making corporation.

For shares chart, there are general rules or guidelines to be determined to avoid mistake on "buying" the shares, and "trading" the shares. 'Buying' shares mostly mean, we keep for quite a long time especially shares with dividend. While 'trading' shares definitely buy and sell within months that usually would not be kept and not to be hold for years.

Let's have a look :

1. The Industries Behavior. Selection shares based on Industry Performance.
Knowing the industry sector in chart would give us a general view of the investor's interest towards the sector. Any news relates to the industry would and could be projected or impacted to the chart later.

    Construction at the height at this moment.
    Plantation is turning downwards at this moment.

Since shares most of the time could only be bought from the low and sold at the high for a profit,  this is a general guideline of the type of industry. By checking on the industry performance and then select the corporate that we would be interested on. Some of us may skip this, but this is a general view on how industry looks like.



2. "Gap" Chart indicates one or few player easily control of shares price. Avoidance.
Prices changes in chart definitely mean the interest of shareholders. Those chart without a linking on next candlestick is the 'pushing' as well as 'throwing' shares effect, where prices suddenly jump from the opening or close drop suddenly at one price. I name this kind of chart as "gap" chart.

These gap chart would indicate us that do not buy or trade this kind of shares counter as the shares prices would be determined by individual or a team of investors. Just like during a match, one single adult badminton player against one single children badminton player or an old-aged player against a professional player. Both situations create an unfair match.

Below are two examples charts for our easy references.





3. Fixed or stagnant share prices. Avoidance.

This type of chart would be prices up and down within a fixed range. Based on example below, the difference is 0.005 between each range, which would give us  a fixed profit 10% - 20%. This type of chart would require trade in and out many times in order to achieve 100%. Though this is a very simple trading, however once wrong entry is made, we would need to accept losses as the range of the price may be dropped to even lower to achieve higher profit %. However if we feel like it, start taking it from at least 20% - 25% profit level so that it can be an attractive for others to join in later.



Based on example below, the difference is 0.01 between each range, which would give us  a fixed profit 10% - 20%.

4. Inactive Shares become sudden attraction. Avoidance
Becareful on taking from an inactive shares by a sudden "push up" price level. There is a difference between a sideway compare with a nobody interested shares. Below are two examples. By making a wrong move, we could end up buying the higher price, and later it may drop back to original price level or stay inactive at that level.
The indicator of this is inactive candlestick plus a sudden shoot up candlestick.







5. Determine our profit by drawing Support and Resistance Line
One very basic skill is to draw support and resistance line. These lines are actually our target profit and stop loss. Measure each range and calculate the profit %. For example, (3.40-3.10=0.30), in order from 3.10 jump to 3.40, profit is 0.30, therefore 9.67%. The fastest is within a month to six months.
 

For example, (0.87-0.75=0.12), in order from 0.75 jump to 0.87, profit is 0.12, therefore 16%. The fastest is within a month to three months.


By measure target profit % and the activeness of the share prices within the timing frame, example 2 above would gain more popularity. However, item number 3 above, would probably beat every shares out there on the short-short time profit %.



All these are a very basic steps knowing how buying low and selling high is important with a self-defined profit percentage. Choosing a share would become much more easier now. We may start to look at our own shares on hand.

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