Monday, August 3, 2009
Technical analysis is the study of trends. A technical analyst will examine charts and try to predict the future based on different patterns he or she sees in the charts. The charts themselves are records of the price of the stock in question. There are many different patterns that people associate with certain trends, and they are thought to generally to be precursors to other trends. These trends are the result of emotion and are not always accurate. For example, the pet rock fad boosted one company's stock up to ludicrously high levels, but it never recovered back to that point. Any patterns showing that it would bounce back up were clearly wrong. People's emotions are what makes the stock go up or down.