How to Accurately Interpret Charts
Cramer considers himself a fundamentalist by nature, meaning he prefers to analyze the facts about the underlying companies rather than the pictographs of the price action in their stocks. He does, however, respect technical analysis.
Enter "Chart Week," a week-long series devoted to educating homegamers on how to use the charts safely and correctly.
According to Dan Fitzpatrick, a highly regarded technician on Wall Street, the charts tell the story, but it may not be as you think. The charts don't predict what's going to happen, but give information about what investors are doing with the stock. Too many investors don't understand this about technical analysis, Cramer said. These misguided chartists look for patterns, assuming the market will behave the way they think the market should and that's a mistake.
"If you’re going to rely on the charts," said Cramer. "You have to keep your eyes open to the signals they’re actually sending, not just wait for them to do what everyone expects."
To explain what charts say about the whole market, Cramer sought Fitzpatrick's help to interpret the action of the Dow Jones Industrial Average. Watch the video to see his full analysis.
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