Specific Investor Scenario

You open a trading app like Zerodha or Groww and you’re greeted with a screen full of red and green bars. Some are tall, some have long “tails,” and they seem to be bouncing off invisible lines on the chart. What are these bars trying to tell you about the future of a stock like Reliance or TCS?

Quick Answer

Stock charts are visual histories of human emotion (greed and fear). Candlesticks show you the price range within a specific time, while Support and Resistance show you where that price is likely to pause or reverse.

Official Fact: According to NSE educational resources, technical analysis assumes that “market action discounts everything,” meaning all known information is already reflected in the current price and volume.

The Foundation Pillars

1. Japanese Candlesticks

Each “Candle” on your screen represents a trading session (e.g., 5 minutes, 1 hour, or 1 day).

  • The Body: Shows the difference between the Open and Close prices. Green means the price went up; Red means it went down.
  • The Wick (Tail): Shows the High and Low prices reached during that session.
  • Pattern Example (Doji): A candle with no body and long wicks signifies “Indecision” in the market.

2. Support and Resistance

Think of these as the “Floor” and “Ceiling” of a stock’s price.

  • Support (The Floor): A price level where buyers consistently step in to prevent the price from falling further.
  • Resistance (The Ceiling): A level where sellers consistently step in to prevent the price from rising further.
  • The Role Change: Once a price “Breaks Out” above Resistance, that level often becomes the new Support.

3. Volume: The Secret Sauce

Volume is the total number of shares traded during the candle.

  • High Volume + Green Candle: Strong conviction among buyers. This move is “Reliable.”
  • Low Volume + Green Candle: Weak conviction. This move might be a “False Breakout.”
  • Rule of Thumb: Always verify a price move with volume.

Practical Implication for Investors

  • Don’t Trade in the Middle: Most professional traders only buy near Support or sell near Resistance. Buying “in the middle” often leads to poor risk-reward ratios.
  • Timeframes Matter: A Support level on a “Daily” chart is much more powerful than one on a “5-minute” chart.
  • Patterns are Probabilities: A “Bullish Engulfing” pattern doesn’t guarantee the price will go up; it simply increases the probability of an upward move.

Action Items for Investors

  1. Switch to Candlesticks: If your app is showing a “Line Chart,” go to settings and switch to “Candlesticks.” It carries much more information per pixel.
  2. Draw Your Lines: Look at a chart of the Nifty 50. Try to find two prices where the index has bounced at least three times. Those are your Support and Resistance lines.
  3. Verify with Data: Use official NSE Live Data to cross-check the volumes you see in your app.

Learning Technical Analysis at NSE Academy: nseindia.com/education/knowledge-center

Verify current status at nseindia.com, bseindia.com, or msei.in before trading.