When you select stocks are you viewing Daily, Weekly or Monthly Charts? A few months back I set up my charting service with 1 day, 2 day, 7 day and monthly charts. I have been taking the charts from the report and viewing them in each of the above charts. I notice that it paints a different picture. For instance looking at NWK on a daily chart I do not see anything that makes me excited about this stock (Probably because of my inexperience). But looking at a 7 day chart of the same stock I see a beautiful pattern forming. Also when I view the different time periods the moving average changes. On the 7 day chart NWK has not closed below the 10 day moving average. As a matter of fact it has been following the 10 day MVA and now seems as though it has come to a point where it must either break above or below the weekly charts 10 day MVA. How do you know when to you use the different time frames, or does it vary with different stocks?
Great questions. When we look at a chart for the first time, we back off and look at a daily chart for at least a year. If we need to see an even bigger picture, we take a look at 2-day or weekly. You are right; you can see things from a different perspective backing away and moving in as well. After we get an idea of whether the stock is in an uptrend, downtrend, and where it is in its range we start looking for a pattern. Is it in one of the signature patterns we teach in the Technical Analysis seminars? Is it bouncing up or down a trendline or moving averages? A daily chart is good for this, but we can also look at a weekly chart as well. If we find a stock in a good pattern, then we start looking closer. We look at a weekly chart to see if it is under accumulation or distribution. A weekly chart makes that easier as we can look at where institutions closed a stock for the week as that says a lot about whether they are interested in it or not. It is also easier to match the volume to the price movement as it clears out a lot of the ‘noise.’
In sum, we look at the chart from a number of views. We are not trying to see something that is not there, but we are making sure we don’t miss something. We may see a stock we like, but then when we look at it from other views it might not continue to show solid attributes. The key is to take a chart and decide if there is something there worth looking at. We start with a daily chart for a year or more and then start narrowing it down from there.
