Technical Analysis

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MarketWatch  Feb 23  Comment 
The tale of Jack Dorsey’s two companies could not be more different. Square, Dorsey’s mobile payments company, is still in high growth mode, and plans to keep investing in the business, meaning that profitability is not in sight for the next...
MarketWatch  Feb 21  Comment 
The major U.S. benchmarks continue to take flight, staging a decisive, and nearly uninterrupted, February break to all-time highs. In the process, the S&P 500 has tagged a near-term target — S&P 2,365, detailed last week — a potential...
MarketWatch  Feb 14  Comment 
True to recent form, strong bull trends have been confirmed this week, across the widely-tracked U.S. benchmarks. On a headline basis, the S&P 500 has notched three straight record closes — effectively nailing a near-term target at 2,333 —...
MarketWatch  Feb 13  Comment 
Lack of QQQ volume “confirms the expectations of an early February top,” warns technical analyst Tom McClellan.
Equitymaster  Feb 9  Comment 
Posted by Equitymaster        'The rich get richer and the poor get poorer' when it comes to Indian states, according to the economic survey data, which revealed that wealth disparity between Indian states is increasing. This is quite...
MarketWatch  Feb 7  Comment 
Technically speaking, the major U.S. stock benchmarks are off to a bullish February start. Consider that the Nasdaq Composite has reached all-time highs this week — by definition, uncharted territory — while the S&P 500 continues to rattle...




 
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Technical Analysis is the the study of the historical trend in an investment's price in order to predict future price movements.

Care must be taken when using technical analysis to be aware of fundamental events as they can invalidate prior technical analysis and cause large market shifts. In fact, a competing form of analysis is fundamental analysis.

The process of technical analysis can be applied to most markets including markets for commodities, securities, and currencies. Key concepts involved in technical analysis include: charts, support, resistance, trends and indicators.

Charts

Charts are graphical representations of market price and/or volume information in some time frame. For example, published charts generally provide hourly, daily or weekly data. One of the most common types of charts used for technical analysis is the Candlestick Chart. Formations, such as the commonly recognized Head and Shoulders pattern, can often be used to predict future price movement with a relatively high degree of accuracy.

Support Level

Support, within a particular time frame, is defined as a point at which a falling market price finds a bottom and does not fall any further. The price appears to bounce off of support levels and return to higher levels. There is no guarantee that a prior support level will continue to be a support level in the future.

Resistance Level

Resistance is similar to support. However, resistance is the point at which a rising market price finds a top and does not rise any further. Again, resistance may be applied to a time frame and of course a previous resistance level may fail to provide resistance in the future.

Trends

Market prices will often drift higher or lower in a series of waves. If a market is making higher highs and higher lows then it is generally considered to be trending up. If a market makes successively lower lows and lower highs then it is considered to be trending down.

It is often useful to draw a trend line along the levels of support and resistance. In particular, it is common for these trend lines to form a channel which can then be used to make trading decisions. Of course, a market may follow trend lines for a period of time but there is always the risk that it will stop doing so.

Indicators

Technical analysis often relies on the use of indicators. These indicators use mathematical formula to analyze price (and perhaps volume) action. Charts can be made using the indicator values and the information they provide can also be used to make trading decisions.

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