Suppose you own three shares of Harbor Coffee, our fictional coffee brand, bought at $66 each: 3 × $66 = $198 before fees. Your draft says: “Quiet morning: volume is 0.5× average. A $62 stop limits my loss to $12.” Is that note ready to keep?
The note sounds precise. Your job is to decide which claims the evidence supports. The track now comes down to one task: repair this note well enough to review it later. A better note can be the whole outcome, with no trade required.
Read the incomplete case
In year 3 (FY3), Harbor gets 70% of revenue from packaged coffee and 30% from shops. Its $120 million in free cash flow is operating cash left after capital spending. The financial health check tests that cash generation; valuation asks what the business is worth. A rising share price answers neither question.
The five closes and final candle return from the opening chart; the holding, later morning volume and possible sales are new assumptions after FY3. Prices are unadjusted US dollars, with no splits or distributions.
- Chart: Linear scale, daily candles, regular sessions only. Five completed closes: $62, $63, $65, $64, $66.
- Last completed candle: Open $64, high $68, low $63, close $66.
- Average: SMA5, the five-session simple moving average, is $64 through the last completed candle.
- Following session: At exactly 10:30 a.m. US Eastern, the quote is $66. Volume since the regular-session open is 600,000 shares.
- Comparisons: The prior 20 completed sessions averaged 1.2 million shares per full day. The FY3 annual price range was $55–$72. No benchmark history is supplied.
Choose the strongest volume note, then identify the draft's other unsupported claim:
- A: Quiet activity at 0.5× average.
- B: Institutional conviction behind the shares.
- C: We need a matching comparison before calling this quiet or busy.
Separate facts from missing context
Check the chart settings: five-session span, daily candles, timestamp and price adjustments. The last completed candle closed at $66. The identical 10:30 quote comes from the next, unfinished session. Same price, different evidence.
Five closes are too short to establish a long-term trend, and this packet does not establish $62 as support. That level came from the draft, not a demonstrated pattern. Carry forward the moving average as SMA5 = $64 through the prior close.
Check dates before using relative strength or annual ranges. The $55–$72 range belongs to FY3; this later chart needs its own dated range. No benchmark series means no basis for an outperformance claim.
Choose C. A's arithmetic is right, but it compares part of a day with a whole day. B invents who traded and why. Before reading on, name the missing comparison. Match the clock before you divide.
You need the average volume traded from the regular-session open through 10:30 across those same 20 sessions. For this case, suppose that missing figure is 250,000 shares. The ratio is 600,000 ÷ 250,000 = 2.4×.
Trading is heavier than the matching average. That tells you how much happened, not who caused it or what happens next. A missing comparison becomes a concrete next check.
Check the claimed loss limit
Test the loss claim against a real source: the Stop Order section of the SEC's “Stop, Stop-Limit, and Trailing Stop Orders” bulletin (July 13, 2017; updated August 18, 2026). Does it promise the $12 cap?
No. A US stock stop order becomes a market order when triggered, so its execution price can differ from the stop price. The price you get determines the loss.
An execution at $62 would lose 3 × ($66 − $62) = $12. If the price gaps down and the shares sell at $58, the loss is 3 × ($66 − $58) = $24. Both are before fees. The $58 fill is one possible outcome, not a forecast or the worst case.
Writing $62 in a research note places no order. The packet also leaves out why you own Harbor and when you need the money. Those answers belong alongside position sizing when reviewing your exposure.
Keep optional tools optional
RSI compares one asset's smoothed gains and losses; MACD tracks the difference between two price averages. Bollinger Bands describe a changing price envelope; chart-pattern research tests claims about repeated shapes.
Each needs a question and matching inputs. None supplies a missing volume comparison, benchmark or valuation evidence. You can repair this note without calculating any of them. Agreement among related indicators can mean counting the same price evidence twice.
Keep a note you can review
Write four short lines before reading the example: business question, observed chart facts, unresolved explanation, and next check or review condition. A conditional chart review note pairs what you know with what would make you revisit it.
| Note field | Corrected Harbor note |
|---|---|
| Business question | Whether future cash generation supports $66. |
| Observed chart facts | Next session, 10:30 a.m. US Eastern: $66 quote. Prior-close SMA5: $64. Volume: 2.4× the 20-session same-time average. |
| Unresolved explanation | Why trading is heavier; what the business is worth. |
| Next check or review condition | Read original company event disclosures; revisit the business case if expected cash generation changes. |
Your wording can differ. Leave the FY3 range attached to its date, and drop unsupported outperformance and promised loss caps. Keep the note and its review condition in your investing journal.
Waiting has a job here: find out whether new business information changes the cash outlook. If disclosures offer no explanation, leave the cause unresolved. A clear next check is a finished piece of work; there is no graded buy-or-sell answer.
In short
- Charts add dated observations to business research; price strength cannot fill a valuation gap.
- Match the clock before you interpret a volume ratio.
- A review level or stop price does not guarantee a maximum loss.
- A corrected note and a justified wait are complete outcomes. More indicators are optional.