Stock Charts: Technical Analysis & Trading Patterns

Technical analysis is an alternative investing strategy to fundamental analysis and if used correctly can be especially effective.

Stock charts are like Swiss Army knives, they are super handy tools that can be used in a variety of ways. Not only do they tell a story of the stock, but they can also be used to make precise investment decisions. The style of using stock charts to make these investment decisions is known as technical analysis and is often viewed as the polar opposite of fundamental analysis. Whether using technical analysis or not, knowing how to read stock charts is extremely important to any investor.

What is Technical Analysis?

Where fundamental analysis looks at the stock’s financial statements, its competitors and markets, technical analysis uses various stock charts to determine if the company is invest-able, pin-pointing the best price and time to invest. A stock chart shows you the history of a stock’s price over time and comes in a variety of formats. There are a multitude of variables that you can control in the display of stock charts that are essential to the use of technical analysis including:

1. Time: you can have stock charts that show minutes, days, weeks, months or even years worth of price history.
2. Chart style: you can display the data as a line graph, mountain, graph, OHLC (Open-High-Low-Close), Candlesticks, and more.
3. Scaling: the vertical axis can usually be adjusted between arithmetic and logarithmic scales. The arithmetic scale is what you would expect, showing the horizontal lines at even intervals of $5 or $10 dollars ($50 in the case of Google). The logarithmic scale give you a better visual of the percent change in stock price so that a stock that the distance between a price of $20 and $40 is the same distance as $40 to $80 (both of which are 100% returns).
4. Volume: displays the amount of shares trading hands everyday usually as a bar graph.
5. Moving Averages: are among the most popular and important tool available to newer investors because they are easy to use and understand. Also, moving averages are used as components in many other charts and analyses. By smoothing out data points and number series, moving averages make it easier to identify trends and tendencies.
6. Trend lines: graphically display the unmistakable direction in which a stock is heading.

The key to technical analysis is the history of prices paid for a stock and the volume of shares traded. The security’s intrinsic value is of no concern to those who employ technical analysis as a trading method but rather rely on charts and other tools to identify patterns and trends that can suggest future activity. In other words, the only thing that matters is a security’s past trading data and what information this data can provide about where the security might move in the future. The field of technical analysis is based on three primary assumptions: price moves in trends, the market discounts everything, and history tends to repeat itself.

Technical analysis can be used on any security with historical trading data. Alternative investments such as Forex, fixed-income securities (think bonds), futures and commodities are all ripe for analysis of the technical sort as well. The common application, however, remains on traditional stocks. There are variety of pre-determined chart patterns that have been identified, labelled and used by those who employ the use of technical analysis for stock investing.

Types of Trading Patterns

Technical analysis investors attempt to identify charting patterns and trade the stock based on these pre-determined price movements. Here are some brief examples of the most popular trading patterns identified in technical analysis.

Double Bottom and Top: these formations are reversal patterns that most often identify medium term and long term trend changes.

Cup and Handle: this formation literally resembles it’s named a cup with a handle at the end. It is widely known thanks to the CANSLIM trading strategy popularized by William O’Neil.

Saucers: also known as “rounded bottoms” or “U-Shape” formation have the same look and feel to them as the Cup and Handle pattern, except they lack a handle and often have a wider base. They are more difficult to trade as finding a proper entry point can be tricky, however when spotted, they can yield large returns.

Head and Shoulders: this formation can be the most difficult to spot but is historically reliable. It is a reversal pattern most often formed over a period of months.

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The Best Stock Newsletters as of June 29, 2025

Ranking of Top Stock Newsletters Based on Last 3 Years of Stock Picks

We are paid subscribers to dozens of stock newsletters. We actively track every recommendation from all of these services, calculate performance, and share the results of the top performing stock newsletters whose subscriptions fees are under $500. The main metric to look for is "Excess Return" which is their return above that of the S&P500. So, based on last 3 years ending June 29, 2025:

Rank	Stock Newsletter	Stock Picks	Average Return	Excess Return	Percent Profitable	Max % Return
1.	Alpha Picks	76	63%	40%	73%	969%
	Summary: 2 picks/month based on Seeking Alpha's Quant Rating; Retail Price is $499/yr. See details in our Alpha Picks Review.			July, 2025 Promotion: Save $50
2.	Moby.co	308	43.3%	12.3%	74%	1764%
	Summary: 60-150 stock picks per year, segmented by industry; Retail Price is $199/yr. Read our Moby Review.			July, 2025 Promotion:Next pick free!
3.	Stock Advisor	72	41.2%	6.9%	78%	258%
	Summary: 2 picks/month and 2 Best Buy Stocks lists focusing on high growth potential stocks over 5 years; Retail Price is $199/yr. Read our Motley Fool Review.			July, 2025 Promotion: Get $100 Off
4.	Value Investor	39	17.5%	6.1%	38%	410%
	Summary: 10-25 stock picks per year based on Zacks' Quant Rating; Retail Price is $495/yr. Read our Zacks Review.			July, 2025 PROMOTION:$1, then $495/yr
5.	Rule Breakers	66	40.0%	4.7%	61%	311%
	Summary: 2 picks/month focusing on disruptive technology and business models; Lifetime average return of 355% vs S&P500's 149% since 2005; Now part of Motley Fool Epic. Read our Motley Fool Epic Review.			Current Promotion: Save $200
6.	TipRanks SmartInvestor	121	10.6%	3.7%	55%	340%
	Summary: About 1 pick/week focusing on short term trades; Lifetime average return of 355% vs S&P500's 149% since 2015. Retail Price is $379/yr. Read our TipRanks Review.			Current Promotion: Save $180
7.	Action Alerts Plus	394	20.0%	3.4%	57%	220%
	Summary: 100-150 trades per year, lots of buying and selling and short term trades. Read our Jim Cramer Review.			Current Promotion: None
8.	Stock Advisor Canada	36	32.3%	0.5%	69%	378%
	Summary: 1 pick/month from the Toronto stock exchange; Retail Price is CD$199/yr. Read our Motley Fool Canada Stock Advisor Review.			July, 2025 Promotion: Save $100
Top Ranking Stock Newsletters based on their last 3 years of stock picks' performance through May 31, 2025 as compared to S&P500. S&P500's return is based on average return of S&P500 from date each stock pick is released. NOTE: To get these results you must buy equal dollar amounts of each pick on the date the stock pick is released. Investor Business Daily Top 50 based on performance of FFTY ETF.