Charts = No Opinion

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Article source: http://www.stockhideout.com/. Used with author's permission.

The one thing we like most about charts is that there is no "opinion" involved. In other words, what you see is what you get. If a stock has moved up to say the $100 level 3 times and got repelled each time and now it's back to 99.88, it is there in "black and white" for all to see, and it is either going to bust through and make a nice run or it will get repelled yet again. No opinion, no talking heads, no guessing, nothing. It will either breakout or fail again. You cannot "alter the picture", so when you pull up a chart, it will show you exactly what has happened and on that information you can watch for the breakout. Learning how to play chart patterns is very important for us as traders, so please learn all you can about it.

This next point is one of the single most important items involved with making successful chart trades. If a stock is testing a resistance level, such as in the example we used above, it will certainly help to have the "market" behind you when you are looking for the breakout. Remember that in day to day life, sector strength and overall market "tone" are the most important aspects of trading. In other words if the DOW is down 275 and the NASDAQ is down 100, what are the chances XYZ is going to bust through that resistance level and run? Not much really. On the other hand if the DOW is up 175 and the NASDAQ is flying, XYZ very well could squirt through that old resistance and make a great move higher. So, paramount in trading chart patterns is to try and align a great chart with an "up day". This will greatly enhance your chances of scoring home runs!

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