|Elliott Wave Theory||
Why stock market exits?
Business is the cornerstone of any
economy. Almost every large corporation started out as a small,
mom-and-pop operation and through growth, became financial giants.
Wal-Mart, Dell Computer, and McDonald’s had combined profits of $10.34
billion this year. Wal-Mart was originally a single-store business in
Arkansas. Dell computer began with Michael Dell selling computers out of
his college dorm room. McDonald’s was once a small restaurant no one
had heard of. How did these small companies grow from tiny, hometown
enterprises to three of the largest businesses in the American economy?
They raised capital by selling stock in themselves.
is technical analysis?
Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. 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 uses a wide variety of charts that show price over time
refers to the use of price patterns and volume to predict future
valuations and trends within the stock market. Pure technical analysis
ignores fundamentals, or the underlying economic conditions of the
companies themselves. This strategy reasons that stocks are influenced
by the behavioral patterns of investors, which have become predictable
over time. Technical analysis, like all theories related to the stock
market, will always spark controversy.
Technical analysts are
traditionally referred to as chartists, who gauge price action and
predict future movement by analyzing charts. Further, volume is used as
an additional indicator to support these predictions. Volume refers to
the amount of shares or capital that trades hands related to a
particular investment and time frame. Price charts, combined with heavy
volume, will produce and confirm familiar geometric patterns.
Typical chart patterns may be
described as head and shoulders, flags and pennants, hammer, shooting
star, engulfing, piercing, wedges and triangles etc. These patterns
always feature lines of resistance or support that behave as barriers
for share prices to cross over and are used to predict trend.
The Trend is Your Friend
Technical analysis is used to identify trends and set off signals to investors whether to sell or buy into the market. Trend relates to the pattern of investments moving in one general direction. Assets that are behaving with a bullish trend are set to gain value, while assets following a bearish trend will lose value. Stock charts featuring higher highs and higher lows characterize bullish trends. Investments making lower lows and lower highs against resistance points are demonstrating a bearish trend.
Investments will not continue
upwards towards infinity, neither will investments fall to zero with
regularity. Followers of technical analysis will also use the technique
to identify "reversals" in trend, which mark switches between
bullish and bearish sentiment.
Technicians believe that charts,
trends and patterns are the end result of predictable human psychology.
For example, support levels at Rs.50 per share for Company X occur
because individual investors reason that they will buy "if this
thing drops to Rs.50." Meanwhile, resistance levels emerge when the
very same investors target Rs.100 to sell out at a profit. Technicians
reason that the stock market is controlled by irrational, yet regular
investor behavior that repeats itself historically.
Investor behavior is deemed to be
irrational because making a decision to buy or sell at a certain price
point, irrespective of fundamentals, makes little economic sense.
Further, investors always panic and liquidate at the bottom of a market,
which is the worst time to do so.
Copyright © 2013 NIFAWN Technologies Pvt. Ltd. All rights reserved.