What a Price Chart Shows
A price chart shows, on the vertical axis, the price of an asset and, on the horizontal axis, time. The representation most used by stock investors is the Japanese candlestick chart. Each candle represents a time period — a day, a week — and contains four data points: the opening price, the closing price, the high, and the low of the period.
Anatomy of a Candle
The body of the candle represents the difference between the open and the close. If the price closed higher than it opened, the body is typically green (bullish candle). If it closed lower, it's red (bearish candle).
The wicks are the thin lines extending above and below the body. The upper wick reaches the period's high. The lower wick reaches the low. A long upper wick on a bearish candle indicates the price tried to rise during the period but sellers pushed it back down — a sign of selling pressure.
A single candle rarely says much. What matters is the sequence of candles and the context of the full chart.
Timeframes: Daily vs Weekly
A daily chart shows one candle per trading day. A weekly chart shows one candle per week. The same asset over the same period looks different depending on the timeframe: the daily has more detail and more noise; the weekly smooths out volatility and shows the trend more clearly.
Investors with a horizon of weeks or months typically analyze the weekly chart for the overall trend and the daily for the specific entry. Looking only at the daily chart can create the perception that something "is falling" when on the weekly it's just a minor correction within a solid uptrend.
Trend: The Direction of Price Over Time
An uptrend shows a sequence of higher highs and higher lows — each bounce reaches higher than the previous, and each correction ends higher than the previous. A downtrend shows the opposite. A sideways trend shows price oscillating within a range without clear direction.
There's no need to draw formal trendlines to identify it. Just answer: are prices, in general, higher or lower than three months ago? Are the bounces reaching higher or lower than previous ones?
Support and Resistance: Zones Where Price Reacts
Support is a price level where, historically, price has stopped falling and bounced — there are enough buyers at that level to absorb selling pressure. Resistance is the opposite: a level where price has found sellers that slow the advance.
These zones aren't exact lines but areas of interest. When price breaks through a resistance with high volume, that resistance frequently becomes support in the future. This is called a polarity change and is one of the most reliable patterns in technical analysis.
What the chart doesn't do is predict the future. It shows the past behavior of price and volume — useful information for evaluating probabilities, not certainties. For the next level — how to identify bases, breakouts, and pullbacks in real charts — the How to Read a Setup article in the curriculum continues from here.