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Technical Analysis
Charts present the opinion of all market participants
That is a powerful notion. Everyone who thinks they know enough about a security to actually invest their money according to that opinion is represented in that chart. Think of it; the traditional fundamental research report represents the opinion of one or two, or maybe three people, and the chart represents the opinion of the entire market for that security. Wow. The people who can read those charts have a powerful advantage. The fact is that after a century of charting markets we have discovered that investor behavior is often typical and results in the formation of a number of patterns that give quite a reliable signal about future events.
Pattern Recognition
This is the starting point, the absolute basics of chart reading. This is where virtually everyone begins to learn about reading charts. There are different kinds of patterns that develop based on the changing opinion of investors and they appear on charts like road signs on the highway. They can tell us where to go if we know how to read them. Sadly, even some pretty clear road signs can be missed or misread. Oddly that's a good thing, unless you're the one getting lost, but really, that's what makes a market. There have to be some people getting it right and some getting it wrong.
Fundamental Analysis with Chart Analysis = POWER
The way to make this work for you is obvious. If you pick up some glowing report about company XYZ you can now (or soon will be able to) call up a chart and see if everyone else agrees or disagrees with that report. Or, conversely, if you see a chart that screams buy, you can track down some good fundamental analysis to see if the rest of the players are about to suck you into a nasty mistake.
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Classic Patterns Classic is a term used to refer to a group of patterns that typically have a longer-term horizon (greater than 12 days) and which have distinct price swings such that the price swings form distinctive patterns. The names of classic patterns often reflect the shape of the formation such as the Double Top, Double Bottom, Head and Shoulders Top, Ascending Triangle and so on. Bullish:
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