The three premises on which the technical theory is designed are:
1. Trustworthy market
Market prices, over time, provide everything that can be known about a stock and its future prospects. The market as a procedure is very well-performing at discounting whatever can greatly influence prices. Unforeseen events are quickly priced into the stock, among them new competition, legal or financial problems, a company takeover, the death of a founder, and so on. Those of who know how to look forward the market, act on knowledge, even though seldom unknown or unanticipated ways such as sharp earning drops, and selling volumes start to pick up on rallies. Through astute analysis and sharp analysis there are traders, investors and analysts outside a company or industry who see these changes coming.
Knowledge about a company’s stock and future earning opportunity, which are reflected in the stock price are also reflected in a price trend or movement to go up or go down. Trends doe not only go up or down, but can go sideways, which is sometimes called a trend less pattern. A sideways advancement can be believed as to be a third trend possibility. A stock may move between 40 and 50 multiple times, a trend is the course of action of a body in motion staying in motion until an equal countervailing force will happen.
When trends return, history is repeating it self, the pattern in price trends occurring and reoccurring is largely foreseen. If there was a wide variety of supply in a particular stock and was previously for sale at 50, if selling of this stock caused a retreat in prices, then it may well be the same case when the stock reaches the same level again. If history does not repeat it self then this shows that demand, was, this time strong enough to control selling.
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August 12 2010 04:01 pm | Uncategorized