UNREAL: He’s given readers the chance to make 1,359% in total closed gains since October – including losses. This is how he did it.
When purchasing stocks or stock options, there’s only one foolproof way to making sure you’re getting into a winning trade every single time…
Predicting the future.
But the crystal balls and clairvoyants from old fairytales can’t help you in the stock market. No one knows with 100% accuracy what will happen today or tomorrow – but I have the next best thing.
It’s no crystal ball, but it does come pretty close – all while taking out the guesswork. No more trades based on feelings and emotions or stock suggestions from your rich Uncle Bob over cocktails.
The best way to predict these stock movements is by using historic patterns and technical analysis – which ultimately go hand in hand. These technical indicators use math, time, and price to uncover stocks’ patterns.
And they are best uncovered by looking at charts.
By taking the components of a stock chart, you can find two measures that are the tried and true best way to find the most lucrative trades.
Here’s how to read one of the most informative stock charts out there – and take a peek into the future…
Support and Resistance: Two of the Most Revealing Technical Indicators
Let’s start off by breaking down a stock chart, which plots a stock’s price over a given period of time.
We will use Netflix Inc (NASDAQ: NFLX) as an example.
In the chart below for NFLX, each day’s price movement is designated with a candlestick bar – the red and green vertical bars. We choose to use candlestick bars because they accurately illustrate the open, close, high, and low prices of the trading day.
Bullish days (the stock closed higher than the open) are colored green, and bearish days (the stock closed lower than the open) are colored red. You can tell the highs and lows the stock reached that day by looking at the thin line that extends from the middle of the candlestick, marking the prices.
Based on the chart, you can see how NFLX has traded over the past several months.
It’s difficult to tell on the still image above, but there’s a function on these charts where you can tell the exact price to the cent.
I used this function to know that on November 4, 2019, NFLX opened at $288, traded as high as $295.39, as low as $287.16, and closed up at $295.39 – which means that it is a green candlestick since the stock closed higher than it opened.
Along with daily movements, you can see the highs and lows over the given period of time. Based on this chart, you can see that NFLX has traded as low as $280, and as high as $450, which means the stock’s overall trend over this time frame is up.
Trends tend to stay in motion, so it’s a good bet that NFLX will go up from here, technically speaking.
Now, let’s dive further into what these candlestick charts can show us.
The most powerful technical indicator you find on these charts is the support and resistance.
Support is like a floor for a stock – a point that stops its downward movement. Resistance is like a ceiling – a point which stops a stock’s upward movement. The best news is that these levels tend to occur at round numbers – NFLX shows $10s and $20s, for example.
As you can see in the chart below, NFLX tends to stop at these round numbers. Once reached, NFLX either breaks through to the next level or retreats to the prior level.
Now, you may find yourself asking, “Why are these measured in even numbers and increments?”
For one thing, it’s psychological. People think in round numbers. Retail traders (you and me) use them to decide if NFLX is a bargain or if it is “overpriced.” More importantly, institutions who are responsible for the bulk of trading volume (the big money) use round numbers as buy and sell points and use computers to trade their portfolio of stocks in-sync with these levels.
Using these indicators, we have the next-best-thing to predicting the future.
We can tell based on patterns and statistics where NFLX will trade next!
To break it down even further, here’s the rule of thumb:
- Go bullish if stock closes > resistance. Price target is next resistance level.
- Go bearish if stock closes < support. Price target is next support level.
Notice the number of times this simple system worked on NFLX in the chart below:
Once the support and resistance is broken, NFLX routinely moves to the next $20 level.
Currently, NFLX is resting on $420 support and has bounced off of $440 resistance. If NFLX breaks down below $420, expect it to go to $400. If it breaks above $440, expect it to go to $460.
And with this overview, we’re only getting started. There are many more technical indicators to fine-tune this system and other factors you can look at in addition to support and resistance levels – and that’s only the ones we know about.
You see, 42% of all stock market activity takes place on a secret market that has been deliberately kept hidden from you for 15 years. But thanks to a famous FBI informant, my friend and colleague, technical trader D.R. Barton, can now see every transaction that’s made on this secret market… in real-time.
It’s something that has given him a competitive edge over almost every other financial professional I can think of. Need proof? Just look at the numbers.
Since October, D.R. has delivered 1,359% in total closed gains. And he’s finally revealing his secret.
Click here now to learn everything about this virtually unknown trading technique.
Talk soon,
Tom Gentile
America’s #1 Pattern Trader
