There are lots of ways to pick stocks — fundamentals, technical analysis, giving a toy to a cat — and the one that works best to you will largely depend on your investment goals and time horizon.
Still, it’s helpful to have a grasp on the basics of all different investment strategies. You never know when they will come in handy.
With that in mind, let’s take a quick second to break down the basics of analyzing charts. Essentially, you are looking for patterns — i.e., objects or shapes that call to mind an image of a similar event in the past. Because patterns repeat, we can use them to determine the probability of a certain outcome. Technical analysis helps us distinguish between what is real and what we think is real. As I always say, “The charts never lie.”
Technical analysis is full of patterns, most aptly named for the type of shape they make. I’m going to describe a few of the more common bullish chart patterns that indicate that a stock is about to head up.
The following will give you a solid grasp of the basics you need to become a pro at reading these chart patterns.