The three premises on which the technical strategy is centered are:
1. Trustworthy market
Market prices, over time, reflect everything that can be known about a stock and its future prospects. The market as a plan is very efficient at discounting whatever can greatly influence prices. Unforeseen events are quickly priced into the stock, for example the new competition, legal or financial problems, a company takeover, the death of a founder, and so on. Those of who know how to forecast the market, act on recommendations, even though seldom unknown or unanticipated thoughts such as sharp earning drops, and selling volumes start to pick up on rallies. Through astute observation and sharp analysis there are traders, investors and analysts outside a company or industry who see these changes coming.
The best information about a company’s stock and future earning potential consumers, 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 movement can be believed as to be a third trend possibility. A stock may move between 40 and 50 multiple times, a trend is the action of a body in motion staying in motion until an equal countervailing force can happen.
When trends go back, history is repeating it self, the pattern in price trends occurring and reoccurring is largely unavoidable. If there was a load 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 overpower selling.
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August 11 2010 05:28 pm | Uncategorized