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Check Out Chart Scale Before Analyzing Stock.(A)(INVESTOR'S CORNER)
Byline: DAVID SAITO-CHUNG
IBD readers know just how much we stress using charts to make buy and sell decisions. Investing without a chart is like driving in a big city for the first time without a road map. It can get scary.
On investors.com, subscribers can look at charts showing the daily or weekly high, low and close. Vertical volume bars run along the chart's bottom.
But did you know that IBD's charts use two styles of portraying a stock's price swings? Knowing this will help you analyze each chart accurately. If you don't, you could misjudge a base as, say, too wide and loose when in fact it's actually solid and tight.
The daily charts on investors.com use an arithmetic scale for price changes. So the price change between every horizontal black line has the same dollar value.
If you view Microsoft's daily chart, you'll see a heavy black line drawn every 10 points. But the price change between each black line varies by stock. For Michaels Stores, it's every 5 points in price. For recent IPO MedSource Technologies, each black line represents 2 points.
Why care? Suppose you come across a stock with sterling fundamentals and excellent ratings, but its base on a chart looks wild and ...
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