The Interpretation Of Price Action

Studying the behavior of price movements; the manner in which prices have moved from one level  to another could be useful to identify probable next moves.

(1) How price leave previous level
The kind of move through which price leaves previous level tells how strong the move it is. There could be three different moves – First, price gradually moves up within few hours or days. Second, price moves strongly with red or green candles in it. Third, there could be a big gap up or down.

(2) Time spend to reach at that price
The lesser the time spend at a level, the more aggressive move it represents. It means, when a price is not sustaining at particular level and keep moving to make newer highs or newer lows, momentum is strong.

(3) How far is price from previous level
The further the price is away from previous level, lesser is probability of it to come back to that level soon. It clearly signals that stock is in trending phase.

Identifying these actions on chart and interpreting them according to current trend or pattern could be useful to identify next probable move.