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Technical Analysis

Fundamental analysis entails examining financial statements in an effort to develop long range expectations about a companies future outlook- technical analysis is somewhat a hybrid of this. Technical analysis requires identification of patterns in security prices in order to identify short term or medium term trends in prices. Market price trends versus information about a company's financial standing (technical vs. fundamental) is essentially the basis of the theory behind technical analysis.

Technical analysts will analyze a securities charts to determine price points. These price points are basically pointing out investors' decisions to buy or sell which determines the prices of all securities; This is basic economics- supply vs. demand. Technical analysts or chartists, will analyze a securities historic charts and compare price movements and make decisions based on similar price movements (trends) shown in real time.

Trends show movement of a stock- uptrend and downtrend. The goal behind technical analysis is to discover these trends as well as the turning points of the trends. This is when investors are either buying or selling. When investors are buying, there is greater demand for a given security, therefor a higher price will result (uptrend). The opposite is true for a downtrend. Often times patterns that have indicated these reversals or turning point in the past will be similar to current trends for a given security. Specific trend types are outlined below.

A quick review of the types of signals that each type of chart may show to be true is helpful when reviewing current market trends.

Bearish Signal

Bullish Signal
Inverse Saucer

Head & Shoulders

Inverse Head & Shoulders
Support Breakout

Resistance Breakout

Trend analysis
Support and Resistance Levels
Head and Shoulders Formation

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