Technical Analysis

Bar Chart Interpretation

Alan Tan
alanph.tan@thomsonreuters.com

Last updated on 27 Sep 2010

1 Technical Analysis – Bar Chart Interpretation

Agenda

• A Single Bar
• The Close
• The Highs and Lows
• The Range
• Inside Day and Outside Day
• Key Reversal Day

2 Technical Analysis – Bar Chart Interpretation

A Single Bar
• The Daily bar chart is fundamentally the most
important.
• Trading decisions are made based on information High
coming on stream throughout the trading hours of
the day. The Range of the day is established based Last
on these trading decisions.
• The Close represent the cumulative trading
decisions and perceived risk of the market
Close
discounting all information made available Open
throughout the trading session.
Low
• Any information that is made available after the
trading hours will be reflected in the Open of the next
trading session. This form part of the perceived risk
of carrying a position into the next trading session.
• Perceived risk is not inherent in intraday bar chart.

3 Technical Analysis – Bar Chart Interpretation

The Close - Closing Price Position in Range

4 Technical Analysis – Bar Chart Interpretation

The Close - Closing Price vs Opening Price

5 Technical Analysis – Bar Chart Interpretation

The Close - Closing Price vs Previous Closing

6 Technical Analysis – Bar Chart Interpretation

The Highs and Lows

7 Technical Analysis – Bar Chart Interpretation

The Range - Expanding and Contracting Range

8 Technical Analysis – Bar Chart Interpretation

Inside Day and Outside Day
Inside day Outside day
• price congest on 2nd day – • bigger the better
suggest lower trading activities
• suggest increased trading
• This state of equilibrium suggest activities
it has discounted all recent
• New high is made but at the
information
same time lower low is also
• If no additional information made
comes on stream, more profit
• signals pause or reversal (key
taking activities will occur on the
reversal day) in trend
3rd day and a ‘soft’ reversal takes
place • may be short lived
• otherwise, trade on breakout in
either direction on 3rd day

9 Technical Analysis – Bar Chart Interpretation

Key Reversal Day
Key Reversal Day

• An outside day range

• For an uptrend, Open above last Open
Close but Close below previous Low above last Close
Close above
• For a downtrend, Open below last previous
Close but Close above previous High High

• The next session, Open nears last

close and then trend reverses Close below Open
previous below last
• Stronger than just an “outside day”
Low Close
• A very reliable signal Up-trend Down-trend

10 Technical Analysis – Bar Chart Interpretation

Key Reversal Day - Example
Daily QUSc1 [Bar]
[Professional] 5/5/2004 - 6/2/2004 (GMT)
Price
QUSc1, Last Trade, Bar USD
1/30/2006 112*24 112*25 112*19 112*22
106*16

106

105*16

105

104*16

104
Key reversal day
103*16
103
11 18 25 02
M ay 04

11 Technical Analysis – Bar Chart Interpretation

Review
Key points:
• The Daily Bar is key
• Higher Highs/Lows or Lower Lows/Highs – most basic
element of a trend
• Contracting range is a precursor to a trend reversal
• Inside day – the day of equilibrium
• Key Reversal Day – never fails

12 Technical Analysis – Bar Chart Interpretation