Line Chart

If you represent the daily price of a stock by a point on a chart, and if you join these points with a line, what you get is a line chart. Let's study this particular kind of chart in a little more detail using some examples.

Anatomy of a Line Chart

New to Stock Charts? Looking for easy to read stock charts? This chart is a good place to begin your education.

This chart, like most other 2-dimensional charts, has two axes — a horizontal and a vertical. The horizontal axis shows time; the vertical axis shows stock price.

When viewed as a whole, the chart for a particular stock tells us the story of the stock price .... where it has been in the past, how it has fluctuated, the highest it has been in the past year/month/week, the lowest it has been in the past year/month/week.

Viewing the chart over a particular time window helps us raise some important questions. For instance, if you see a sharp decline or peak, you definitely want to find out what drove that.

An Example

Let's take look at the chart for Stryker Inc., a medical technology company. Stryker's stock symbol is SYK. We're going to look a time line of 1 year.

So what can we interpret from this chart? First, we see that SYK started at its highest in September 2008 — around $65 — followed by a sharp decline in November to around $37. The next three months saw the price stabilize at this level. But then, at the end of February, SYK suffered another major decline reducing it to around $32. The next seven months saw SYK limp back to $45 at the end of the window.

This bouncy journey prompts some important questions: What happened in November, and then later in the Feb-March time-frame? SYK's price dropped 45% from its September '08 high .... this is significant! What made SYK rise up to its $45 price — a 40% increase from February end?

Curious about these answers? Be sure to check out the How to Read Stock Charts page to see how you can go about finding answers to important questions like this.

In summary, this basic, but important, type of Stock Chart helps us make valuable observations on the price of a stock. This is the first step in learning to analyze stock charts.

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