The Technical Analysis Corner
Technical Analysis is useful to all investors, not just short term traders but also to the long term investor as well.
Whilst Technical Analysis is a complicated sounding term, it is a very basic approach to investing. It is a study of prices, with charts being the primary tool used.
Although the roots of Technical Analysis stem from the Dow theory, developed by Charles Dow in 1990, it is over the past 15 years or so that its implementation has increased substantially, mainly due to the increase in computing power available.
Today, Technical Analysis is accepted as a viable analytical approach by most Professional Investors. Yet even with its' acceptance, the number of people who actually perform Technical Analysis remains relatively small.
We use the word 'Security' when referring to any tradeable financial instrument, be it stocks (Equities); Bonds (Fixed Interest); Indices; Commodities or Mutual Funds/Collectives.
Fundamental Analysis tries to determine the actual value of a security by assessing criteria such as Net Asset Value; expected earnings per share; cash flow; p/e's; dividend cover and much more. However, markets
over-react both on the upside and downside, mainly driven by investor psychology and the alternating emotions of confidence and fear.
Technical Analysis ignores the fundamentals. It is the process of analysing the security's historical prices in an effort to project the probable future price. In a way, the future can be found in the past.
The overall trend of money flowing into or out of the market or your security is what effects the prices you get today. Charts can reveal at a glance the effect of these flows and hence the current psychology.
Investmentimer.com seeks to combine both fundamental and technical analysis to provide a snapshot view of whether your market/security is a Buy or a Sell.
There are many excellent reference sources of both Fundamental and Technical Analysis available. The purpose of the Technical Analysis Corner is to provide the basics of what to look for in a chart of a security. Initially we have included the guides used in our charts but will add to the list any guides requested by our subscribers.
As technical analysis can be especially useful to long term investors, our examples will mainly use monthly based charts. However, although we are taking a long term perspective, we must emphasise that the same principles apply to shorter term charts as well.
Please enjoy the examples, we hope that you will subscribe to Investmentimer.com as your guide to increased profits AND protection from
losses:
