What is Technical Analysis ?
This is a way of predicting future price movements based only on observing the past history of prices.
This price history may also include other quantities such as trade volumes.
These methods contrast with fundamental analysis in which prediction is made based on an examination of the factors underlying the stock and other instruments.
In practice both traders will use a combination of both technical and fundamental analysis.
Technical analysis is also called charting because it is the graphical representation of prices that play a crucial role.
Resistance is a price which an asset seems to have difficulty rising above.
This may be a previously realised highest value or a psychological important number
This is the level below which an asset price seems to be reluctant to fall
There may be sufficient demand at this low price to stop it falling any further,
These are formed by joining together the successive peaks and troughs in the price history. To form a rising (or falling) support or resitance level.
Sometimes two moving averages are calculated
say a 10-day and 250-day average
The crossing of these two would signify a change in the underlying trend and maybe a time to buy or sell.
Relative Strength Indicator
The relative strength indicator is the percentage of up moves in the last N days
A number higher than 70% is said to be overbought and therfore likely to fall
and below 30% is said to be oversold and should rise
An oscillator is another indicator of over/underbought conditions
These are plots of a specified number of standard deviations above and below a specified moving average.
Head and Shoulders
Saucer tops and bottoms
Point and figure charts
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