Highlighting intraday price action
The majority of the trading volume happens in the first 1.5 hours of the day and the last hour. The two highest-volume time slots for buying and selling during the day are also at the most important time frames for bar and candlestick charts, near the open and the close. The volume is not consistent throughout the day, and this trend is quite obvious on 60-minute charts.
Chart courtesy of StockCharts.comIntraday price and volume.
Some other clues can show up on 60-minute charts. While it is not always obvious, the market may open down slightly during strong uptrends but end up closing higher. On a 60-minute chart, the opening would start below the previous close. This typically shakes unfamiliar traders who may be worried they are going to lose their gains. Stocks ebb and flow. They get momentum to go higher, and then they pull back slightly. It is important to understand this give-and-take during uptrends.
Being aware of the time of day and the volume can help investors either buy or sell their stocks when there is more liquidity.
Using 60-minute charts for index watching
News events throughout the day may make stocks wobble on an intraday chart. One display that is useful to use is a 60-minute chart of a market index or ETF so you can see how the large-cap index has moved over the last two weeks.The image below shows one such chart using the ETF that tracks large-cap stocks, the SPY. Using a range setting of 11 days with 60-minute bars, you can see that the market is making a series of lower highs and lower lows during late June 2017. Seeing where the market is relative to the preceding two weeks is helpful. In the chart below, each time the SPY rallies, it is unable to make a high above the previous high. It is also making lower lows. If the trend starts to change to higher highs and higher lows, investors can see the price momentum start to improve throughout the trading days.
Chart courtesy of StockCharts.comEleven-day, 60-minute chart.
The same principle applies to stocks, indexes, and ETFs. As price ebbs and flows, investors looking to own a stock that has been consolidating can use 60-minute charts to evaluate the change from lower highs and lower lows to higher highs and higher lows.
If you want to be a short-term trader, you need to use short-term charts. A smart practice is to look at the daily chart to see the main short-term trend, and then look at the 60-minute chart to help you with entries into or exits out of the stock. If the daily chart is falling and the 60-minute chart is weak, you may need to wait until the trend on the larger period (daily) is improving. A pullback within an uptrend is the best combination to help on your entry. Trading results on 60-minute charts improve greatly if you’re trading with the main trend on the daily chart.It is hard to hold a winning stock for months to capture a big gain by looking at short-term 60-minute charts. Short-term charts are helpful only for short trades.
By looking at short-term 60-minute charts, you can get a look at the investor sentiment for a very short-term trend. You can also use this shorter time frame to help expose the change from down to up, or up to down.