- Consolidation ranges of a few months to one year
- Annual highs
- Annual lows
- The price trading range for the last year
- Breakouts to new 52-week highs (one-year highs)
- Breakdowns to new 52-week lows (one-year lows)
The image below shows Nike (NKE) in October 2009 moving to a new high for the first time in a few years. The chart has three years of daily information plotted in a bar chart format. While the price is squished together, you can see the stock move above previous prices. In October 2009, the stock goes to a new one-year high. Four months later in February 2010, the stock moves to new all-time highs. A lot of stocks were still very weak after the financial crisis and not close to new all-time highs. Seeing a stock do very well while other stocks are still recovering suggests strength.
Chart courtesy of StockCharts.comDaily chart showing a stock becoming a winner.
If you look at stocks as they move to new highs after moving sideways, you need to consider what the current shareholder is thinking. All the investors within the last year are happy to hold the stock as it starts climbing.
The best thing to see on a stock chart is a stock acting like a winner. The best way to have a winning portfolio is to own winning stocks. A common saying in the investment community is this: If you want to own a winner, buy one!
Owning Nike as it broke out to new highs was beneficial. Then the stock consolidated in the top right corner of the image above. The image below shows what happened to Nike afterward. The stock continued to make new one-year highs for the next six years without making a new one-year low. The stock still had retracements of as much as 25 percent during the six-year run.
Chart courtesy of StockCharts.comDaily chart showing a stock staying a winner.
The disadvantage of looking at a long-term chart using daily candles or bars is that you can no longer see the individual price points. Having multiple years on the chart using different time periods (weekly or monthly) enables you to see the information clearly, but you lose specific information like gaps.
Converting to a line chart with daily information can help a little. The price labels for the highs and lows change with this type of presentation. Whereas bar charts and candlestick charts show intraday highs and lows, a line chart shows only the closing price highs and lows. Select Solid Line from the drop-down menu under Type in the Chart Attributes area. This cleans up the chart significantly and still allows you to see the trend.
Chart courtesy of StockCharts.comA daily chart showing a stock staying a winner in line chart format.