Chart Reading

Reading a price trend and its momentum, distinct from noise.

• An uptrend shows a series of higher highs and higher lows
• A downtrend mirrors that with lower highs and lower lows

The tell

Look at the overall shape of the chart, not the most recent candle.

Common misconception

Extrapolating the very last move — that's reading history, not predicting the market.

Telling a trend from a single move

A stock's chart shows a steady climb for months, then drops sharply over the last three days. Is the trend now down?

1. Look at the overall shape first: a series of higher highs and higher lows over months is an uptrend.
2. A three-day drop is a single recent move, not a new pattern of lower highs and lower lows.
3. Until the pattern of highs and lows actually reverses, the last move is noise on top of the trend, not a trend change.

Judge the trend from the overall pattern of highs and lows, not the most recent candle — one sharp move doesn't reverse a trend.