Technical Analysis

RECENT NEWS
Financial Times  Jul 22  Comment 
Divergence between gloomy surveys and stable data
Benzinga  Jul 22  Comment 
U.S. equities all followed a similar pattern during the bullish years of 1995, 2003, 2009 and 2012, according to Oppenheimer's head of technical analysis Ari Wald. According to Wald, the current market is now flashing the exact same patterns. He...
The Economic Times  Jul 22  Comment 
RSI shows a bearish divergence from the stock price; it has also fallen below the overbought zone at 70. The stock has cut below a two-month long ascending trend channel, seen negative for the stock.
MarketWatch  Jul 19  Comment 
The U.S. markets continue to take flight, with each widely-tracked stock benchmark notching new closing highs this week. Against this backdrop, the S&P 500 remains near-term extended, and due to consolidate, though the more important longer-term...
Clusterstock  Jul 18  Comment 
After a post-Brexit misstep, the stock market has regained its footing and roared past all-time highs in the past week. The strength has been broad-based, and it appears to Sheba Jafari, a technical analyst at Goldman Sachs, that this upward...
Forbes  Jul 12  Comment 
Technical analysis is much decried and there is plenty of evidence that charting is mumbo-jumbo. But looking at the current Dow chart makes me bullish.
MarketWatch  Jul 12  Comment 
U.S. stocks are off to a strong third-quarter start, with each major benchmark reaching less-charted territory. Notably, the prevailing rally has been underpinned by statistically unusual, and distinctly bullish, market internals, laying the...
Benzinga  Jul 8  Comment 
The questions of if, how and why technical analysis works are hotly-contested among traders. Understandably, it may be hard to wrap your head around why patterns on a chart would dictate the price movement of shares of a billion-dollar...
Benzinga  Jul 8  Comment 
AT&T Inc. (NYSE: T)’s incredible 2016 bull run may have finally hit a technical bump in the road this week. After peaking as high as $43.40 on Tuesday, the stock has pulled back to around the $42 level in early Friday trading. Despite the...




 
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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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