Research and Analysis

Technical Analysis

Technical analysis is the study of price action in markets through the use of charts and quantitative techniques to attempt to forecast price trends.

The techniques can be applied to any market with a comprehensive price history. Technical analysis does not try to analyze the financial data of a company, such as cash flow, dividends, and projection of future dividends; because of this lack of fundamental analysis, technical analysis is sometimes derided by critics as having no predictive qualities. Technical analysts or technicians often counter with an industry favorite analogy: A fundamental analyst gives an hour long description of a company's financial health to a potential investor. Pleased with his presentation, the analyst asks, "Are there any questions?" The investor replies, "So is the stock price going up or down?"

Technical analysis is less concerned with why a price is moving (poor earnings, difficult business environment, poor management, etc. or other fundamentals) than it is on the fact that the price is consistently moving in a particular direction. To a technician, profits can be made in any market by positioning yourself in the direction of the price trend. If the price trend is up, then look for opportunities to buy, if the price trend is down, then look for opportunities to sell.

So far, we have found that a useful tool for technical analysis is Point and Figure charts.

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