6.5 What is Technical Analysis ?
TECHNICAL ANALYSIS MADE EASY
As discussed earlier, technical analysis is the study of a share's price movement in the past and using it to predict where the price will head in the future. The basic assumptions made in technical analysis are as follows:
- Market action discounts everything.
- Prices move in trends (uptrend, downtrend or sideways movement).
- History repeats itself.
How is technical analysis carried out?
- Analyse the stock chart you are interested in.
- Look out for the trends (downtrend/uptrend/sideways).
- Look out for any particular patterns.
- Look out for support and resistance levels.
- Look out for indicators and ensure that they are in tune with the trend.
- Decide to buy or sell.