Technical Analysis
Many investors purchase stocks based on their research of a company’s fundamentals, friends offering stock tips or from media hype. However, much of the company’s information available to us via press releases may well be months old. And we often forget to read the warning following Press Releases which reads: ” Neither the TSX, nor any other securities regulatory authority, has approved or disapproved of the contents of this news release”.
I am not suggesting that press releases are misleading, simply they are often skewered with a bias towards the company. As a result I highly remind every trader/investor that your investing dollar deserves protecting and the decision making process you incorporate should include technical analysis.. Even though fundamental analysis can provide you with strong evidence of a good investment candidate, there are many external influences that can drastically affect the the success of initiating a position in this company. By incorporating technical analysis you can greatly enhance your possibility of a profitable trade. Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. However, like weather forecasting, technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is “likely” to happen to prices over time”. Technical Analysis has a built in set of rules that removes the emotion that often gets in the way of common sense and reason. By examining long, medium and short term charts you may be able to identify valuable information that can alter the entry price for your next trade.
Although the media might be hyping recent success of a particular stock, technical analysis might warn you that a recent run-up might be ending and that a retracing of part of the gains might be forthcoming. Better to wait for opportunities as the stock back-fills rather than folllowing the herd and getting in at the recent top.
For anyone interested in learning about technical analysis I highly recommend you log onto www.stockcharts.com and click on the “Chart School” tab. This site will provide you with a basic introduction to charting and also provides you with chart analysis articles, technical indicators, market indicators and a section on trading strategies using charts.
I believe that by creating a balance of fundamental research with technical analysis you will be well prepared to make informed trading decisions
