Intermediate Stock Market Course

Introduction

You already understand what shares are and how to place an order. Now you'll learn how experienced investors analyse stocks before buying — using charts to time entries and financials to judge quality.

Two Ways to Analyse a Stock

There are two main schools of analysis, and skilled investors often use both:

Reading Candlestick Charts

A candlestick summarises four prices for a period — open, high, low, close. The thick part is the "body," the thin lines are "wicks."

• Green (bullish): closed higher than it opened.
• Red (bearish): closed lower than it opened.
• Long wicks show rejection of a price; long bodies show strong momentum.

Common Candlestick Patterns

A few single/double candle shapes signal likely turns:

• Doji: open ≈ close — indecision, possible reversal.
• Hammer: long lower wick — buyers rejected lower prices (bullish).
• Shooting star: long upper wick — sellers rejected higher prices (bearish).
• Engulfing: a big candle that "swallows" the previous one — strong reversal.

Support & Resistance

Support is a price level where buyers repeatedly step in and stop a fall. Resistance is where sellers repeatedly cap a rise. These levels guide entries, exits and stop-losses.

Trends & Trendlines

A trend is the market's overall direction:

• Uptrend: higher highs and higher lows.
• Downtrend: lower highs and lower lows.
• Sideways: price moves in a range.

A trendline is a straight line joining the lows (in an uptrend) or highs (in a downtrend). A break of the trendline can signal the trend is changing.

Chart Patterns

Larger shapes formed over many candles hint at what may come next:

Moving Averages (MA)

A moving average smooths price into a single line that reveals the trend. Common ones are the 20, 50 and 200-day MA.

• Price above a rising MA → uptrend.
• Short MA crossing above long MA → bullish "golden cross."
• Short MA crossing below long MA → bearish "death cross."

RSI — Relative Strength Index

RSI is a momentum meter from 0 to 100:

• Above 70 → possibly overbought (stretched up).
• Below 30 → possibly oversold (stretched down).

MACD — Momentum Shifts

MACD compares two moving averages to spot changes in momentum. When the MACD line crosses above its signal line, momentum is turning up; a cross below suggests it's turning down. The "histogram" shows how strong the momentum is.

Volume Analysis

Volume is how many shares changed hands. A price move backed by high volume is far more trustworthy than one on thin volume.

Fundamentals & Key Ratios

Fundamentals measure the real business behind the stock. A few ratios do most of the work:

Reading Financial Statements

Three statements tell a company's story:

• Income statement: revenue, costs and profit over a period.
• Balance sheet: what it owns (assets) and owes (liabilities) at a point in time.
• Cash flow statement: the real cash coming in and going out.

Valuation Basics

Valuation asks: "Is this stock cheap or expensive for what you get?" A simple approach is to compare a company's P/E with its own history and with peers in the same industry.

Building a Watchlist & Trade Plan

Shortlist quality stocks and, before entering, decide three numbers:

1. Entry: the price you'll buy at.
2. Target: where you'll book profit.
3. Stop-loss: where you'll cut the loss.

Discipline & Consistency

Even great analysis fails without discipline. Stick to your plan, don't chase losses, and review your trades weekly to learn from mistakes.