It is one of two disciplines (the other being Fundamental Analysis) to evaluate the performances and prospects of securities listed on the stock-market.
It uses price and volume data over a range of time frames. The price data includes open and close prices for the period, as well as the highest and the lowest traded prices. Volume is measured in both the number of shares traded, and their value for the period.
The raw data should be exact, and the computerized statistical manipulation scientifically sound. Although historical, the data can be current with literally only seconds in delay. The analyst can choose from a range of chart formats how best to display the results. The weak link is the interpretation of the findings, influenced as it is by observer bias, knowledge and skill. For this reason it is often said that technical analysis is more of an art than a science.
It is true to a limited extent that “history repeats itself”. Historical data may be a guide to future price action, but since it will be the outcome of the continuing trading decisions of market participants, it is always unknowable. Participants are motivated not only by facts but also by fickle market sentiment.
A key objective of chart analysis is to establish the presence and direction of price trending. This is the secret to profitable investing be it short or longer term.The logo above displays in Japanese candlesticks, a trend reversal which commences with a bullish engulfing pattern, in which the first green candlestick after a downwards sequence engulfs the last of the red candle-sticks.