I am very good at reading people so long as my analysis doesn't include me in the calculations.
I usually spook people a bit when I first unleash my powers of empathy. I kind of employ both an Ne + Fi with the occasional flair of Ni. (I have very good Ni ability.... My problem is that I simply don't trust it as often as I should.... With my Ne talking me out of a flash of analysis.)
I have several different modes of empathy based on factors such as: how well I know this person, how well they know me, and what do I think this person needs from me?
Sometimes I am just there to listen and be silently supportive. Example: one of my INTP friends broke up with his gf of 6 years a number of years ago. So he would come over to my house and we would play Lego star wars for hours. Eventually he would start talking and I would just listen. He is a smart guy, he knew exactly where things went wrong... So he didn't need me to point out the obvious... He just needed to get what he was thinking out of his head with someone.
Sometimes what I sense is that this person needs some tough love. Example: my ISFJ friend has been a serial dater for years. Always coming up with some lame excuse as to why she doesn't want to date him anymore. (actual examples: his shoes were brown, he was an inch shorter than me, he drove a Volvo.) to me a "deal breaker" is: hi, I solicit prostitutes whilst shooting up heroin. So one night when she was whining particularly hard about still being single... I decided that listening time was over. I turned to her and said very unemotionally exactly what I thought about what she was doing.... And that at a certain point one needs to look at themselves to see why relationships aren't working out instead of assuming that 100% of men suck. It took many moons to drive this point home, but listening me had to move out for awhile.
In the end the well being of my friend is my highest priority, and while the tough love aspect of my empathy isn't what comes most naturally to me... I am able to put it to good use as needed.
The types that have best "read" me in return have been: INFJ (friends), INTJ (friends and ex) and ENTP (ex after he knew me long enough), and INTP (friends). In basically that order. Ni sees what I am concealing, and the NTPs get me once I draw them a map so their Ne doesn't talk them out of analysis.