Stocks do tend to continue on a certain path, but there are times when a trend falters, or actually changes direction. Accurately identifying when such a reversal has occurred is one of the toughest things to do in technical analysis, Lo says. That's a complicated technique that some Web sites perform automatically. If there is no bar, there is no trend. In addition to trend-spotting, you also should know about support and resistance.
Support is a price at which a stock tends to stop falling.
If you pull up a chart on just about any stock, you can see low points on the graph where the stock appears to bounce, without going lower. Resistance works the same way, but on the upside. If a stock breaks through support or resistance, that's generally a sign that the trend in place will continue. To learn more about support and resistance, as well as technical analysis in general, check out the educational section of the StockCharts site, called ChartSchool . ClearStation also can give you educational tips and message boards to get help from the ClearStation resident experts.