Technical Analysis

RECENT NEWS
Forbes  May 26  Comment 
In our most recent GMAG monthly blogs from April and May, we discussed how we position portfolios in sideways markets and the importance of being flexible to take advantage of tactical opportunities. In that vein, this blog is focused on the...
MarketWatch  May 24  Comment 
Twitter’s stock hits all-time intraday low, but Class A “bullish divergence” in a number of momentum indicators suggest a sharp short-term bounce may be just around the corner.
MarketWatch  May 24  Comment 
Technically speaking, the U.S. markets’ bigger-picture backdrop continues to support a bullish-leaning bias.
Benzinga  May 23  Comment 
The 2016 Benzinga Fintech Awards is the only event in fintech dedicated to recognizing innovation in financial services and capital markets. Ahead of Tuesday's awards show and gala, meet the industry leaders who will be in attendance. Who they...
MarketWatch  May 23  Comment 
One technical analyst is among those warning that tightening by the Federal Reserve could help send stocks skidding. But he argues the retreat won’t start happening until next year.
MarketWatch  May 17  Comment 
The U.S. benchmarks are traversing the May range against a bullish-leaning technical backdrop. Consider that the S&P 500 has survived its latest retest of major support — the 2,040 area — while crude oil prices have concurrently reached a...
Benzinga  May 17  Comment 
Goldman Sachs analyst Mark Ozerov expects the recent upside momentum in oil to continue for the medium term. Metals are expected to continue to decline as the physical market re-balancing in metals remains inferior relative to that in the oil...
OilVoice  May 17  Comment 
Technical analyst Jack Chan reports the energy sector cycle is down and a multiweek correction is in progress and discusses what that means. Our proprietary energy cycle indicator turned down last
MarketWatch  May 16  Comment 
The divergence between Treasury yields and stock indexes over the past few months has been flashing warning signs that either the stock market or the bond market could be headed for a sharp correction.




 
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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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