Technical Analysis: A Fast-Paced Market's Best Weapon

Moving averages are helpful in determining stock support and resistance

Digital Content Manager
Jun 1, 2023 at 3:26 PM
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    One of the main pillars of Schaeffer's Investment Research is technical analysis, which is the study of historical market indicators such as price and volume to determine where a stock may be headed next. This practice allows investors to determine the best entry and exit points when betting on a stock.

    How Do You Apply Technical Analysis?

    Technical analysis is based on the belief that all available information is already priced into a given equity. It also stems from the idea that history generally repeat itself, with stocks forming certain patterns on the charts or indicating their next moves through statistics. 

    If you are a returning Schaeffer's reader or subscriber, you could be familiar with some of those patterns, including ascending triangles, flags, and candlesticks. These are often mentioned in our commentaries, and help us spot areas of support and resistance when a stock either breaks through or below them, so that we can predict sharp moves higher or lower.

    Our market news readers will also frequently see us using moving averages to conduct technical analysis. This indicator helps traders notice trends in price action by averaging out the stock's price, and is just one of several ways we can dig deeper into statistical data.

    Technical vs. Fundamental Analysis 

    Technical analysis is not to be confused with fundamental analysis, the latter of which revolves around the market overlooking value. In other words, those patterns, moving averages, and other chart indicators are not as important as the company's balance sheet and overall profile, which can point to value not being priced into the security. While it can lead to success, fundamental analysis is not as conductive to this fast-paced market due to the extensive research it requires.

     

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