Sometimes charts are made out to be more complicated than they need to be. Lines and colors and arrows pointing every which way. Indicators above and below. There is often some insight to be gained from these, but just as often there is a wealth of information to gather from just a simple view. The chart of Ford Motor Company's (NYSE:F) stock price below is one such example. It is just the price action on a daily basis, the 50-day SMA and a trigger based on them.
What's The Chart Say?
From November through to the end of March, the stock was in a downtrend. You can see that it spent most of its time under the 50-day SMA, in the red area. There were a couple of tests above it but they didn't last long. Then in April, the stock had a change of character and began a trend higher. since then it has spent most of its time above the 50-day SMA, in the green zone. Again, there have been tests below that have failed and the stock has moved higher.
Remember: Red = Downtrend, Green = Uptrend
Very simple chart and an easy one to read. Now, how do you use it? Each of those tests that failed is a potential trigger. As it moves back into the colored zone it is a buy moving into the green; and would have been a short sale moving into the red. The buy signal triggered Wednesday. A more conservative trader might still wait for a move over 17.50 to confirm a break of the previous high.
You see? It's really not all that complicated.