Charts & Price Action

Maya can now read a quote page line by line (how to read a stock quote). Mr. Chartist opens a chart of the Nifty 50, India's best-known index of 50 large companies, and asks her one question first: what is this picture actually drawing? She may say only what she can see.

Up the side: price. On the Nifty's chart it is in index points; on a share's chart, in rupees. Along the bottom: time, in the units the chart is set to. On a daily chart, one step along the bottom is one trading session: show the note on The official close, the hours the exchange is open on one day, and each session is drawn as one small mark, usually a candle; chapter 2 reads one.

Check the price scale before you compare two moves. On a linear scale, every 100 points takes the same height; on a log scale, every equal percentage does. A 10% fall from the year's high of 26373.20 is 2637.32 points; from the year's low of 22179.90 it is 2217.99 points (derived). A linear chart draws the first one taller, though both are the same 10%. Most chart platforms let you switch.

One more check on the price side. A split, a bonus issue or a demerger can make an unadjusted chart show a sudden drop that cost holders nothing; adjusted charts correct for it, as corporate actions explained shows.

Now the bottom. A daily chart counts sessions, not calendar days, and the week of 26 January 2026 shows it. Monday 26 January was Republic Day and NSE was shut: there is no candle, and no space is left for one, so Tuesday's candle sits right after the Friday before. Saturday has none. Then Sunday 1 February has a full candle: NSE held a special session for India's Union Budget, and the index closed 1.96% lower that day.

Data providers can differ. Yahoo Finance's daily series has no bar for that Sunday at all. Check whose data you are reading before you compare two charts.

A line chart joins only the closing prices. On 3 February 2026 it shows the Nifty up 2.55% on the day before, and nothing else: not where the day started, not how far it travelled.

A bar chart keeps all four prices of the session, often called OHLC: the open as a small tick to the left, the close as a tick to the right, the high and the low as the two ends of the bar. That day: open 26308.05, high 26341.20, low 25641.30, close 25727.55. Complete, but slow to read.

A candlestick keeps the same four prices and fills the space between the open and the close: that filled part is the body. It is green (or hollow) when the close is above the open, red when it is below. The thin lines above and below are the wicks, or shadows: how far the price travelled during the session without staying there. On 3 February the body is red and 580.50 points long (derived), because the index opened 4.86% above the day before, on news of the India-US trade deal, and gave back most of it by the close.

Read one candle in order. First the body: did the session end above or below where it began? Then the wicks: where was the price turned back? Then where the candle sits: a long wick at a level where price has turned before says more than the same wick in the middle of nowhere. Technical vs fundamental analysis traces one real candle to its row in NSE's daily file; this lesson does not repeat it.

Most readers work on candles, as this lesson does; switching to a line for a few seconds helps when the direction is hard to see. Candle shapes have names, and Mr. Chartist's book Trading Candlestick Patterns: show the note on Trading Candlestick Patterns teaches them.

A timeframe is how much time one candle covers. On a daily chart, one candle is one session. On a weekly chart, one candle is a week: the open of its first session, the highest high and the lowest low of the week, and the close of its last session.

The election week of 2024 shows the difference. On Saturday 1 June, exit polls forecast a large win for India's ruling alliance. On Monday 3 June the Nifty opened 3.58% higher (derived) and closed up 3.25%. On Tuesday, counting day, early results showed the alliance short of those forecasts, and the index fell 5.93%, touching 21281.45 during the day. From Wednesday to Friday it rose again, to close the week at 23290.15.

Fold those five sessions into one weekly candle: open 23337.90, high 23338.70, low 21281.45, close 23290.15. It has a small red body and a lower wick 2008.70 points long, and the week closed 3.37% above the week before (derived). On the weekly chart, Tuesday is only a wick.

Maya knows this from her own till. The slips for a rainy Tuesday look alarming; the weekly total, after a busy weekend, looks fine. Both are true. Where the comparison stops: her week is her own sales; a chart's week is thousands of strangers' trades.

Which one to use? Many readers start on the daily chart, where one candle is one session and can be read calmly after the close, and use the weekly chart for the bigger shape. Faster charts, by the hour or by five minutes, show more noise. Choose the timeframe for the decision you are making, write it down, and name it whenever you quote a level, as in "on the daily chart".

The previous lesson used "timeframe" for the stretch of time you look at, a window of a month or ten years; here it is the time inside one candle. Both choices change the story.

An uptrend is a staircase: each rise goes past the last peak (a higher high), and each dip stops above the last low (a higher low). A downtrend is the mirror: lower highs and lower lows. Sideways is neither: peaks and dips around the same levels, which chapter 8 calls a base.

The Nifty climbed one in 2026. Its highs: 24089.80 on 26 May, 24530.90 on 7 July and 24774.30 on 3 August. Its lows: 23070.15 on 8 June, 23606.30 on 24 July and 24025.65 on 19 August. Each high above the last, each low above the last.

Then a step broke. The next rise peaked at 24378.60 on 26 August, below the high of 3 August: a lower high, the first warning. On 2 September the index closed at 23914.45, below the last higher low of 24025.65, and the sequence was broken. It went on to 23116.10 on 16 September and 22179.90 on 8 October. Nothing on the chart said it would; the sequence simply stopped being a staircase.

Choose your step size and keep to it. Inside the staircase there were smaller wiggles that did not fit; this lesson counts a swing as the highest high or lowest low within five sessions either side. A different rule finds different steps, so write yours down.

A trend is a description, not a promise. One broken step changes the description; writers differ on whether a single broken low is enough to call a new trend, and this lesson only names what the chart shows.

Support is a price area where falls have stopped before; resistance is an area where rises have stopped before. They form partly because people remember prices: buyers who missed a low may buy near it again, and holders who bought high may sell when the price returns to where they bought.

The Nifty's floor in 2026 shows why they are zones. Seven daily lows sat between 22179.90 and 22304.45: on 30 March, 2 April, and five times in October (the 1st, 8th, 9th, 12th and 13th). That band is 124.55 points wide, about 0.56% of its lowest point (derived). A line drawn at 22180 catches only two of the seven lows; the zone catches all seven. Draw the zone.

What gives a zone weight: how many separate times price turned there, how far apart in time, and how recently. Seven turns over seven months weigh more than one touch years ago.

An old floor can become a ceiling: show the note on Role reversal. The Nifty's low of 24571.75 on the Budget Sunday, 1 February 2026, was a floor. On 4 March the index closed below it, on 5 March above it, and on 6 March below it again; then it fell to 22182.55 on 2 April. On 21 April it rose back to the old floor from below, touched 24601.70 and closed at 24576.60, a few points above it, and the next highs were lower. In August the index closed above that level again: roles are tendencies, not rules.

The real use of a zone is not to say where price will go, but to give you a place where your reading would be wrong. Chapter 8 writes it down.

Volume is the number of shares traded in a session, usually drawn as bars under the price. Each trade counts once: if Maya buys 10 shares from a seller she never meets, the volume is 10, not 20. So high volume never means "more buyers" or "more sellers"; it means more shares changed hands.

There is no universal "high". Read a session against the same share's own recent past; a common habit is to compare it with the average of the last 10 or 20 sessions.

L&T (Larsen & Toubro: show the note on L&T · NSE: LT), the engineering and construction group, filed its results for July to September 2026 with NSE at 5:13 pm on 27 October, after trading had closed. On 28 October, 6174490 L&T shares traded on NSE. Over the 20 sessions before, it had averaged 1930411 a day, so that morning traded about 3.2 times a normal day (6174490 ÷ 1930411, derived). The next day, 1754505: about 0.8 times its own 20-session average. The chart shows a crowd arriving on one morning and thinning the next; it does not show who bought, who sold, or why.

Volume adds weight to a level or a move; it does not promise what comes next. Chapter 9 shows two breakouts on two to three times their normal volume: one held and one failed.

This lesson draws no volume under the Nifty 50. An index is a calculation, not a share, and the "volume" some platforms show for it adds up its members' trading. Read volume on shares.

An opening jump is an open away from the previous close. A true gap is more: the whole new session trades above the previous session's high (a gap up) or below its low (a gap down), leaving empty space on the chart. A gap is filled: show the note on Filling a gap, or closed, when the price later trades back across that space.

Gaps happen because news does not wait for market hours. Exit polls came out on a Saturday; L&T's results came at 5:13 pm.

The Nifty, 3 June 2024: filled the next day. After the exit polls, the index opened 3.58% higher, and its lowest price that Monday, 23062.30, stayed 408.55 points above Friday's high of 22653.75: a true gap up (derived). On Tuesday, counting day, it fell through the whole space and closed 5.93% lower.

L&T, 28 October 2026: still open. It opened at ₹3820.00 against a close of ₹3665.10, 4.23% higher, and its lowest price, ₹3770.00, stayed ₹56.50 above the previous high of ₹3713.50: a true gap (derived). The next day's low, ₹3765.60, dipped into the space but stayed above ₹3713.50, so the gap was still open. How long it stays open, no chart can say.

What a gap means for an order: the price can jump straight past the level where you planned to get out, so a stop is not a promised price (risk management; how stop orders work, placing your first order). The edges of a gap are often watched afterwards, as zones.

A base is a long sideways stretch between a rough floor and a rough ceiling, where shares keep changing hands but neither side pushes the price out. Measure it in candles and name the timeframe: three quiet days are not a base.

A real base, as published. In ChartBook 280: show the note on ChartBook, dated 21 September 2025, M&M Financial (Mahindra & Mahindra Financial Services) was marked as a "Rectangle Pattern" of "1 Year" on the daily chart: one shaded box from its floor to its ceiling, and two lines. It closed at ₹289.55 that Friday, pressing on the ceiling.

A real markup, as published. The same edition marked SBI (State Bank of India) with three lines: a "Horizontal Resistance Line [1.3 Year]" across the "~₹860–₹865 zone" that had capped advances "since May 2024", a second line below it, and one rising line under the higher lows since March 2025. Three lines on twenty months of candles.

Then the plan, in words, before anything happened. Entry, the zone where the plan would act: "On bullish reversal near ₹850–₹855 zone (retest of breakout)", that is, a turn back up when the price returns to the ceiling it has just broken (chapter 9 explains breakouts and retests). Stop, the price at which it would get out: "Below ₹830". Targets, the levels it aimed for: "₹875 → ₹900 → ₹920". And: "A close below ₹830 would invalidate the breakout and suggest a false move." That last sentence matters most: it names the price at which the reading ends.

Your routine is three sentences, and Maya writes hers on the restaurant's order pad. Structure: "uptrend, downtrend or sideways since …, on the daily chart." Nearest zones: "below, … to …; above, … to …", at most two on each side. What ends this reading: "a daily close below … (or above …)." If you cannot write the third sentence, you do not have a reading yet. A sentence like this describes a chart; how much you could lose if it is wrong is the subject of risk management.

The words first. A breakout is a close above resistance; a breakdown, a close below support. A retest is a return to the broken level from the other side, to see whether it now plays the opposite role: chapter 5's 21 April 2026 was a retest from below, after a breakdown. A false breakout is a break that does not hold.

Two plans from one Sunday. ChartBook 280, dated 21 September 2025, marked each share at that Friday's NSE close, and both sat at a ceiling 1.3 years old: SBI had just closed above its own; Polycab was still just under its own, waiting for a close above it. One held and one failed, which is why both are here.

SBI: the retest held. Marked at ₹862.35 after breaking its 1.3-year ceiling, the plan waited for a "bullish reversal near ₹850–₹855". On Tuesday 23 September SBI dipped to ₹851.20, inside that zone, and closed at ₹870.60. It reached ₹875 on 24 September, ₹900 on 20 October and ₹920 on 27 October 2025, when it touched ₹928.00. Its lowest price after the plan, to the end of January 2026, was that ₹851.20, so the ₹830 stop was never reached.

Polycab: the breakout failed in five sessions. Marked at ₹7549.00 under its ceiling at ₹7605, the plan read "On daily close above ₹7610", with a stop "Below ₹7300". On Monday 22 September Polycab closed at ₹7657.00, on about 2.1 times its normal volume (derived): the plan was live. On 25 September it touched ₹7600.00 and closed at ₹7407.50; on Friday 26 September it fell to ₹7272.00, below the stop, in the fifth session after the plan. It did not reach its first target, ₹8200, by the end of January 2026.

Volume did not decide it. SBI's breakout session, 17 September, traded about 3.0 times its 20-session average; Polycab's close above the trigger on 22 September, about 2.1 times (derived). One held and one failed.

What the two teach. Each plan was written before; each named its trigger and its exit; the ending came from the market, not from the pattern's name. Two plans are two examples, not a sample: no success rate can be read from them.

It cannot say why. L&T's 28 October candle shows a jump and a crowd; the reason was filed at 5:13 pm the evening before, in a document the chart never shows. The Nifty's 4 June 2024 candle shows a 5.93% fall; the reason was the vote count.

It cannot see the business. Debt, profit turning into cash, the auditor's notes: none of it is on a chart. Technical vs fundamental analysis showed a bank whose share climbed for ten months after its own filing showed the problem; how to read an annual report and how to research a stock read the business.

It cannot promise an exit price. A gap can jump past a stop (chapter 7); a stop sends an order, it does not create a buyer (circuit limits and surveillance, risk management).

It cannot say what comes next. Every mark in this lesson describes the past. The same kind of breakout held for SBI and failed for Polycab in the same week.

Your eyes add shapes. People find patterns even in random data, so decide what you are looking for before you look, and accept "nothing here today" as a normal answer. A phone screen also squeezes months into a few centimetres and makes every move look steeper; read on a wide screen when it matters.

What a chart can do: describe behaviour in a fixed order, show where buyers and sellers acted before, and give you a written place to be wrong. That is enough to plan, and nothing more.

How much to risk on any plan is the subject of risk management; the feelings that push you past your plan, of trading psychology. And the one thing no candle holds is the business behind the price, such as the results L&T filed that evening: the next lesson opens a company's own report.