Technical Analysis
Conclusion and Resources
There have been entire volumes of textbooks
written on technical analysis. This tutorial just scratches
the surface. Technical analysis is one of those fields where
everyone has a different theory on what works and what doesn't.
If we can leave you with one last tip, it is to back test
whatever strategy you decide to pursue. Back testing means
looking back at several years' worth of charts to see how
a particular stock reacts. Different stocks do different things,
so be sure to do your homework first.
Here are a couple points to remember about technical analysis:
- Technical analysis is a method of evaluating
securities by analyzing statistics generated by market activity,
past prices and volume.
- The advantage of using a bar chart over
a straight line graph is that it shows the high, low, open
and close for each particular day.
- One of the most basic and easy to use
technical analysis indicators is the moving average, which shows the average
value of a security's price over a period of time. The most
commonly used moving averages are the 20, 30, 50, 100 and
200 day.
- Support and resistance levels are price
levels at which movement should stop and reverse direction.
Think of Support/Resistance as levels that act as
a floor or a ceiling to future price movements.
- There are literally hundreds of different
price patterns and indicators out there.
- In our humble opinion, technical analysis
is a terrific tool, but much more effective when combined
with fundamental analysis.
Also See
Technical Analysis page of the Disnat Stock Selection tutorial
"What is Technical Analysis" – Disnat Bulletin, June 2005
"Basic Technical Analysis" – Disnat Bulletin, August 2007
"Momentum: The Most Classic Indicator" – Disnat Bulletin, May 2006
The Canadian Society of Technical Analysts website: www.csta.org (link will open in a new window)
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