A weekly chart is a type of price chart used by traders and investors to analyze the price movements of a financial instrument over weekly intervals. Unlike daily charts, which plot price data for each trading day, weekly charts aggregate price action into one data point per week. This means each candlestick, bar, or point on the chart represents the open, high, low, and close prices for an entire week.

Using a weekly chart offers a broader perspective on market trends and can help smooth out the noise and volatility often seen in shorter time frames like daily or intraday charts. For intermediate traders, weekly charts serve as a valuable tool for identifying longer-term trend directions, key support and resistance levels, and potential reversal zones that might be less obvious on shorter time frames.

The construction of a weekly candlestick or bar follows this basic approach:

Open (week) = Opening price of the first trading day of the week
Close (week) = Closing price of the last trading day of the week
High (week) = Highest price reached during the entire week
Low (week) = Lowest price reached during the entire week

Formula:
Weekly Range = High(week) – Low(week)
Weekly Body = Close(week) – Open(week)

One practical use of weekly charts is in the context of trend analysis. For example, a trader analyzing the S&P 500 index might look at the weekly chart to confirm whether an uptrend remains intact. If the weekly closes consistently form higher highs and higher lows, it signals a sustained bullish trend. Conversely, a break below a key weekly support level might suggest the beginning of a downtrend.

A real-life example can illustrate this well. Consider the EUR/USD currency pair during the first half of 2023. On the weekly chart, the pair showed a clear downtrend from January to March, with weekly closes consistently lower than prior weeks. Around April, the weekly chart signaled a reversal as the pair began forming higher lows and higher highs, which many traders used as confirmation to adjust their positions from short to long. Using daily charts alone might have exposed traders to more false signals due to intraday volatility. The weekly chart’s broader view helped filter out noise and provided a clearer trend picture.

Despite its advantages, relying solely on weekly charts has pitfalls. One common misconception is that weekly charts are always better for “long-term” trades. While they do offer a broader trend perspective, they may also delay entry or exit signals compared to daily or intraday charts. This lag can result in missed opportunities or larger drawdowns, especially in fast-moving markets. Traders should consider combining weekly charts with other time frames (a technique known as multiple time frame analysis) to balance trend clarity with timely execution.

Another frequent question is, “What’s the best way to use weekly charts with technical indicators?” Weekly charts can be paired with moving averages, Relative Strength Index (RSI), or MACD to identify momentum and trend strength over weeks rather than days. For example, a 50-week moving average can act as a dynamic support or resistance level, guiding trade decisions. However, traders should remember that indicators on weekly charts respond more slowly than on daily charts.

In summary, weekly charts are a powerful tool for traders seeking a clearer understanding of longer-term trends and key price levels. They reduce the noise found in shorter time frames and help confirm the bigger picture in market analysis. Nevertheless, weekly charts should be used in conjunction with other tools and time frames to avoid delayed signals and enhance trading accuracy.