Technical Analysis: Charts, Candles & Trends

What you'll learn

  • What technical analysis is, and how it differs from fundamental analysis
  • How to read a candlestick: open, high, low and close
  • How to spot uptrends, downtrends and sideways markets
  • What support, resistance and breakouts mean
  • How moving averages and volume help confirm a move
  • Six beginner-friendly candlestick patterns

In the last lesson you learned fundamental analysis, which asks: "Is this a good business, and is it fairly priced?" Technical analysis asks a different question: "What is the price doing right now, and what are buyers and sellers telling us?"

A technical analyst studies the chart, meaning the history of price and volume. The idea is simple. Every trade on NSE or BSE is a buyer and a seller agreeing on a price. Their fear, greed, hope and panic all leave footprints on the chart. Repeated footprints form patterns, and patterns can hint at what might happen next.

Education only

This lesson teaches concepts, not trading recommendations. Charts show probabilities, never certainties. Every company and price in the examples is fictional. Always do your own research, or speak to a SEBI-registered investment adviser before making real decisions.

Fundamental Analysis

  • Studies the business: profits, debt, management
  • Answers "what" to buy
  • Uses annual reports and ratios
  • Usually suits long-term investing (years)

Technical Analysis

  • Studies the price chart and volume
  • Answers "when" to buy or sell
  • Uses candles, trends and indicators
  • Used for trading and timing entries (days to months)

Many successful investors combine the two. They use fundamentals to pick good companies and technicals to pick a good moment.

The Candlestick: A Day's Story in One Shape

The most popular way to draw a price chart in India, and around the world, is the Japanese candlestick. Each candle shows four prices for one period, which can be a day, an hour or 5 minutes. These four prices are called OHLC:

O
Open: the first traded price
H
High: the highest price
L
Low: the lowest price
C
Close: the last price
Bullish candle (green)Bearish candle (red) High ₹540Close ₹530Open ₹505Low ₹495High ₹540Open ₹530Close ₹505Low ₹495Upper wickBodyLower wickSame high and low. Colour shows whether the close beat the open. The body spans open to close. The wicks (shadows) show the extremes that price reached during the day.

Reading the colours

  • Green (bullish) candle: the close is above the open, so buyers won the session. The open is at the bottom of the body and the close is at the top.
  • Red (bearish) candle: the close is below the open, so sellers won. The open is at the top of the body and the close is at the bottom.
  • A long body means one side was firmly in control.
  • Long wicks mean price travelled far but got pushed back. That is a sign of a tug-of-war.
Quick memory trick

Think of the body as the result of the fight and the wicks as the attempts. A long lower wick says sellers tried to push the price down and buyers fought back.

Trends: Is the Market Going Up, Down or Nowhere?

There is an old saying among traders: "The trend is your friend." Before you look at any pattern, identify the overall direction. Price rarely moves in a straight line. It moves in waves, and how those waves behave tells you the trend.

UptrendDowntrendSideways Higher highs and higher lowsLower highs and lower lowsBouncing inside a range The dots mark the "swing" points. Their direction defines the trend.
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Uptrend

Each rally goes higher than the last, and each dip stops above the previous dip. Buyers are in charge, so traders look to buy on dips.

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Downtrend

Each bounce fails below the last high, and each fall goes lower. Sellers dominate, so beginners usually stay away.

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Sideways (Range)

Price bounces between a ceiling and a floor. The market is undecided, and it's waiting for news or a breakout.

Support & Resistance: The Floor and the Ceiling

Support is a price zone where buying has repeatedly stopped a fall. Picture a floor. Resistance is a zone where selling has repeatedly stopped a rise. Picture a ceiling. These zones form because people remember prices. If a stock bounced from ₹540 three times, many buyers will be waiting at ₹540 again.

Resistance ≈ ₹620 (ceiling)Support ≈ ₹540 (floor) Breakout above resistance →Time →Bounces off the floor and rejections at the ceiling Every touch that holds makes a level stronger. A decisive break is called a breakout (upward) or a breakdown (downward).

Role reversal

Here is a powerful idea. Once price breaks above resistance, that old ceiling often becomes the new floor. The reverse is also true: broken support often turns into new resistance. Traders call this role reversal, and it's why breakouts are often "retested" before the next move.

Beware of fake breakouts

Price sometimes pokes above resistance for a few hours and then collapses back. A breakout is more trustworthy when it closes above the level and comes with higher-than-usual volume.

Moving Averages: Smoothing the Noise

Daily prices jump around. A moving average (MA) takes the average closing price of the last N days and plots it as a smooth line. Each day the oldest price drops out and the newest is added, which is why it "moves".

  • 20-day MA: short-term trend, about one month of trading
  • 50-day MA: medium-term trend
  • 200-day MA: the long-term trend, watched closely by big investors
Golden cross Price50-day MA200-day MA When the faster 50-day MA crosses above the slower 200-day MA, traders call it a golden cross. The opposite is a death cross.

Golden Cross ✨

  • 50-day MA crosses above the 200-day MA
  • Suggests a long-term trend turning up
  • Often seen early in bull phases

Death Cross ☠️

  • 50-day MA crosses below the 200-day MA
  • Suggests the long-term trend is weakening
  • Often seen early in bear phases

Moving averages are lagging indicators. They confirm a trend after it has started and don't predict it. That's fine, because their job is to keep you on the right side of the bigger move.

Volume: The Fuel Behind the Move

Volume is the number of shares traded in a period. It usually appears as bars under the price chart. Think of volume as conviction:

  • Price up with high volume: strong buying interest, a healthy move
  • Price up with low volume: a weak rally that may fade
  • Price down with high volume: heavy selling, so be careful
  • A breakout with 2–3× normal volume: far more reliable than a quiet breakout

Interactive: Candlestick Pattern Flash-Cards

Tap each card to flip it and learn what the pattern suggests. Patterns matter most when they appear at support or resistance and are confirmed by the next candle.

Doji
Open and close are almost equal, so neither side won. It signals indecision. After a strong rally or fall, a doji can warn that the move is losing steam.
Hammer
A small body at the top with a long lower wick. Sellers pushed price down hard, but buyers dragged it back up. After a downtrend it hints at a bullish reversal.
Shooting Star
The mirror image of a hammer: a small body at the bottom with a long upper wick. Buyers tried to push higher and failed. After an uptrend it warns of a bearish reversal.
Bullish Engulfing
A small red candle is followed by a big green candle whose body completely covers it. Buyers have overwhelmed sellers. It is strongest at support after a fall.
Bearish Engulfing
A small green candle is swallowed by a large red one. Sellers have taken control. It is most meaningful near resistance after a rally.
Marubozu
A long body with almost no wicks. One side controlled the session from open to close. A green marubozu shows strong buying and a red one shows strong selling.

Interactive: Read the Chart Yourself

Try each scenario before tapping to reveal the answer.

Scenario 1: Shares of Kaveri Textiles fell to ₹540 in March, June and September, and bounced each time. Today they trade at ₹546. What is ₹540?

A) Resistance · B) Support · C) The 200-day MA

Tap to reveal the answer

B) Support. Buyers have defended ₹540 three times. Traders may watch for a bounce near ₹540 and treat a close below it as a warning sign.

Scenario 2: Nilgiri Foods has been stuck below ₹620 for four months. Today it closes at ₹634 on three times its normal volume. What does this suggest?

A) A likely fake breakout · B) A strong breakout, with ₹620 possibly becoming new support · C) Nothing at all

Tap to reveal the answer

B. A close above resistance on heavy volume is a classic breakout signal. Because of role reversal, ₹620 may now act as a floor if price dips back.

Scenario 3: After a six-week fall, Sahyadri Cement forms a hammer right at a known support level. Should you buy immediately?

A) Yes, hammers always work · B) Wait for confirmation, such as a strong green candle the next day

Tap to reveal the answer

B. A hammer at support is encouraging, but one candle isn't proof. Experienced traders wait for the next candle to confirm, and they decide a stop-loss level in advance (you'll learn this in the next lesson).

Interactive: Build a Candle from Raw Data

On one trading day, Godavari Power has these prices: Open ₹500, High ₹520, Low ₹495, Close ₹515. Reveal each step to draw its candle in your head.

Step 1: What colour is the candle?

The close (₹515) is above the open (₹500), so it's a green, bullish candle.

Step 2: How big is the body?

Body = Close − Open = ₹515 − ₹500 = ₹15. The body runs from ₹500 at the bottom to ₹515 at the top.

Step 3: How long are the wicks?

Upper wick = High − Close = ₹520 − ₹515 = ₹5. Lower wick = Open − Low = ₹500 − ₹495 = ₹5.

Step 4: What's the story?

A solid green body with small wicks on both sides. Buyers were in control for most of the day, and the price closed near its high. That is a confident bullish session.

Common Beginner Mistakes

  1. Seeing patterns everywhere

    Take patterns seriously only at important levels, such as support, resistance or a moving average.

  2. Ignoring the bigger trend

    A bullish candle inside a strong downtrend is often just a pause. Check the weekly chart before the daily one.

  3. Using ten indicators at once

    More indicators mean more confusion. Price, volume and one or two moving averages are plenty to start.

  4. Trading without a stop-loss

    Every chart idea can be wrong. Decide your exit before you enter.

Practise for free

Most Indian brokers and charting platforms let you view free candlestick charts of any NSE stock. Pick the Nifty 50 index, switch to the daily chart, and try to mark support, resistance and the 200-day MA by yourself.

Quick Quiz

1. A red candle means the close was ___ the open.

Below. Sellers won the session, so the open is at the top of the body and the close is at the bottom.

2. What defines an uptrend?

Higher highs and higher lows. Each rally and each dip is higher than the one before.

3. What often happens to resistance after a confirmed breakout?

It frequently becomes support. This is called role reversal.

4. What is a golden cross?

The 50-day moving average crossing above the 200-day moving average. It's a sign that the long-term trend may be turning up.

5. Why does volume matter in a breakout?

High volume shows conviction. Many participants are behind the move, so the breakout is less likely to be fake.

Key Takeaways

  • Technical analysis studies price and volume to judge timing. Fundamental analysis judges quality.
  • Each candle shows Open, High, Low and Close. The body is the result and the wicks are the attempts.
  • Identify the trend first using higher or lower highs and lows.
  • Support is a floor and resistance is a ceiling. Broken levels often switch roles.
  • Moving averages smooth noise. The 50/200-day crossovers signal changes in the long-term trend.
  • Confirm patterns with volume and the next candle, and never trade without a stop-loss.