CSUN

FMC

GFIG

LIFE

SPRT

WAC

GSS

LEE

NTT

PFL

PNW

TJX

BALT

PPC

GAME

JRCC

PWRD

SKX

SSN

AFG

AMG

CVLT

EQY

EZPW

HOTT

JKHY

NI

ODP

OPWV

PTN

UNTD

While fundamental analysts study financial statements and earnings, technical analysts study stock charts. By studying technical analysis, you can identify market trends and price patterns. You can learn about the many different types of technical indicators and employ them to predict future stock prices. These indicators are used to assess which stock is trending and the probability of its direction. Examples of technical indicators include MACD, moving average, and stochastic oscillator.

There are many advantages in using technical analysis. One of the best things about technical analysis is that it is easy to use. The only thing that you need to do is to examine stocks charts, after which you can make your decision on whether you should buy or sell the security. Many people may prefer this method rather than fundamental analysis because they do not want to constantly keep an eye on fundamental activities.

Another reason why you should use technical analysis is that it is convenient and quick to use. Studying fundamental analysis involves reading a lot of past history and current performance to see if a stock is a good buy. On the other hand, using technical analysis means pulling up a chart on your computer with the latest prices for a particular stock, and employing technical indicators to make a decision about that stock. With our recent technology and improvements in computer-assisted techniques, this process can range from a few minutes to an hour. Of course, first you must understand and study the technical indicators. Then you must choose the indicators that you are comfortable using, but mostly importantly, the ones that work for you. Everyone has different technical indicators that they prefer to use. Make sure you use a select few because some technical indicators may contradict one another.

Lastly, there is a common belief that a stock price represents all known information about that particular stock. Therefore, everything that you need to know about this stock is already reflected in their price.

In the end, you should consider using both technical analysis and fundamental analysis. A mix of technical and fundamental analysis can help you better predict a company’s future performance.

ATML

BP

KFRC

KOG

MON

NKE

RDS.A

Technical analysis, as opposed to fundamental analysis, is the study of market action, primarily through the use of charts. The technician believes that anything affecting the price, such as fundamentally or psychologically, will be reflected on charts. Technicians believe that the market discounts everything and that any news about a company is already priced into the stock. Keep in mind that the charts do not cause market action, but rather, they reflect the actions of the marketplace and what has already happened. However, this does not mean you should not study fundamental analysis, since it is just as important.

Technical analysis is applied social psychology because when you analyze charts, you are analyzing the behavior of traders. Charts reflect trades by all market participants: buyers, sellers, and even insiders. Each price on the charts reflects the actions or lack of actions by all the traders in the market.

Technical indicators help make our analysis more objective as it seeks to recognize trends and changes in crowd behavior so that intelligent trading decisions can be made. Technical analysts study charts to find out whether the bulls or bears are in control. They look at past charts for repetitive price patterns and study to recognize the early stages of uptrends and downtrends.

There are 2 main types of technical analysis: classical and computerized.

1. Classical analysis – This is based only on the study of charts, without using anything more complex than a pencil and a ruler. This is mainly the focus on uptrends and downtrends, support and resistance zones, as well as repetitive patterns, such as triangles and rectangles. Its main drawback is its subjectivity: if you are bullish, your ruler will tend to inch up and likewise, if you are bearish, your ruler will tend to inch down.

2. Computerized analysis – This is more of a modern approach whose signals are much more objective. The 2 main types are trend-following indicators and oscillators. Trend-following indicators include moving averages, Directional System, and MACD (moving average convergence-divergence), which all help to identify trends. Oscillators, such as Stochastic and Relative Strength Index (RSI) help identify reversals.

As you can observe, technical analysis is partly a science and partly an art—partly objective and partly subjective.

But be careful because charts are full of false breakouts, false reversals, and flat trading ranges.

Technical analysis is the study of past market data, through the use of charts, to predict a stock’s future price. Technicians believe that anything that affects a stock price is reflected in the stock’s price. Thus, if everything is already reflected in the market price, then we only need to study market prices. Just by studying price charts, you are indirectly studying the fundamentals of a company and whether the psychology of the marketplace for that company is bullish or bearish. For example, if prices are going up, we assume that demand must be exceeding supply, indicating that the fundamentals are bullish. If prices are falling, we assume that supply must be exceeding demand, indicating that the fundamentals are bearish.

An assumption of technical analysis is that history repeats itself. Because chart patterns have worked well in the past, we assume that they will continue to work well in the future.
With that understanding, the purpose of trading using technical analysis is to identify trends in their early stages so that you can trade favorably in the direction of those trends until it shows signs of reversing.

While technical analysis does not focus on the factors affecting the stock price, fundamental analysis does. Employing fundamental analysis includes studying a company’s financial statements and earnings to determine a company’s intrinsic value, or its actual worth. If the intrinsic value of a company is less than its market price, then the stock is overvalued. Similarly, if the intrinsic value of a company is greater than its market price, then the stock is undervalued and should be bought.

To sum up, trading using fundamental analysis studies the causes of market prices while trading using technical analysis studies the effect. As technicians, we believe that we do not need to know the reasons why the market moves since those reasons should already be reflected in market prices.

Many traders consider themselves as either fundamentalists or technicians. However, there are overlaps and some traders do study both methods. For our trading purposes, we are going to focus more on technical analysis techniques and tools.

CBEY

CBT

CNA

DDS

EXPE

MSO

SINA

TSRA