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| Technical Analysis | | | Technical analysis is the second of the two main approaches to investment analysis (the other being fundamental analysis). In its purest form, technical analysis (or charting) disregards the influence on earnings and dividends, and instead bases future price predictions on past trends.
A technical analyst or chartist argues that it is inaccurate to study stock valuation in terms of historical or even present events since share prices are believed to be based on future expectations, not historical record. By its very nature technical analysis views the timing of investment decisions as critical. The chartist trades on the reversal of a trend, unlike the fundamentalist who may hold a growth stock during times of market downturn.
Technical analysis is not without its critics. Like a road map, technical analysis is superb at telling you where you have been, but it does not tell you where the next bend in the road is going to be. It’s like trying to drive forward, while looking at the road behind you in the rear vision mirror. Simply because the road has been in a straight line does not mean that it will continue to head in a straight line. Many also doubt the reliability of the apparently predictive patterns such as double bottoms, head and shoulders, etc. In hindsight, they clearly exist — but if hindsight had any practical significance at all then every investor on the market would be a millionaire!
There are many sites devoted to charting techniques – the more interesting have been noted on this page.
Computers have made charting a dream. With the click of a mouse, investors can have immediate access to price data and can produce any one of a number of technical indicators. Any number of very good programs are available at reasonable cost. The main programs used in New Zealand are Henley Charts and Metastock.
Access to historic price data has also been made considerably easier in recent years. Historic data is now readily available and current data may be accessed electronically on a subscription basis. A number of agencies provide data, as per the links provided. | | | | | | | | Associations | | Society of Technical Analysts of New Zealand Incorporated | | | | Charts Online - New Zealand | | Findata | | StockChartNet | | picks, alerts and portfolio management for NZ, Aust, UK and US markets | | | | | | Charts Online - Overseas | | Bigcharts | | | | Newsletters | | Guppy Traders | | Stock & Commodities | | | | Software Suppliers - New Zealand | | Findata | | | | Software Suppliers - Overseas | | ChartSmart | | MetaStock | | Omnitrader | | Prophet | | TC2000 | | | | Techniques and Approaches | | Fibonacci | | Gann Analysis |
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