Values, thus prices are determined by supply and demand.
Supply and demand are driven by rational and irrational behaviors.
The security prices move in the trend that persist for a long period.
While the causes of changes in supply and demand changes are difficult to determine, the actual shifts in supply and demand are observed in market price behavior.
The advantages of Technical Analysis:
- It's quick and easy.
- It doesn't involve accounting data and analytical adjustments for the difference in accounting methods.
- It incorporates psychological as well as economic reasons behind price changes.
- It tells when to buy (not why investors are buying).
The major challenge to technical analysis is the efficient market hypothesis (EMH).
the views and indicators of technical analysis:
Contrarian View, Following Smart Money View, Momentum indicators and Price and Volume Indicators
Contrarian View:
- Cash Position of Mutual Fund
- Investor's Credit Balance of Breakerage Account
- Opinions of Investment Advisory Services
- Over-the-counter and NYSE
- COBE put/option
- Stock Index Futures
Smart money rules:
- Confidence Index (CI)
- T-bil-Eurodollar Yield Spread
- Debit Balance in Brokerage Accounts (Marging Debt)
Momentum Indicators:
- Breadth of Market
- Stocks above their 200-day moving average
Stock Price and Volume Techniques:
- Dow Theory: Major Trends, Intermediate Trends, and Short-run movements.
- Importance of Volume
- Support and Resistance Levels
- Moving Average Lines
- Relative Strength
- Graphs
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