Horti-Business Management (2+0)

2. Technical analysis

• Technical analysis is the attempt to forecast stock prices on the basis of market-derived data. Technicians (also known as quantitative analysts or chartists) usually look at price, volume and psychological indicators over time. Trends and patterns in the data indicate future price movements.
• It is based on three assumptions. They are,
a) The market discounts everything
b) Price moves in trends
c) History tends to repeat itself

Strengths of technical analysis

1. Focus on Price
2. Supply, Demand, and Price Action

• In its most basic form, higher prices reflect increased demand and lower prices reflect increased supply.
3. Support/Resistance
4. Pictorial price history
5. Assist with Entry Point

• Some analysts use fundamental analysis to decide what to buy and technical analysis to decide when to buy.
Weaknesses of technical analysis

1. Analyst Bias
2. Open to Interpretation

• It should be pointed out that technical analysis is more like an art than a science, somewhat like economics.
3. Too Late
4. Always another level
5. Trader's remorse