Technical Analysis Fundamentals

Technical analysis studies price and volume patterns to predict future price movements. While fundamental analysis tells you WHAT to buy, technical analysis helps you decide WHEN to buy or sell.

Candlestick Charts are the most popular chart type. Each candle represents a time period (1 day, 1 hour, etc.) and shows four prices: Open, High, Low, Close (OHLC). A green candle means close > open (bullish). A red candle means close < open (bearish). The body shows the open-close range; the wicks show the high-low range.

Support is a price level where buying interest is strong enough to prevent further decline. Resistance is where selling pressure prevents further rise. When a stock breaks above resistance, it often becomes the new support — and vice versa. These levels are identified by looking at historical price points where the stock repeatedly bounced or reversed.

Trend Lines connect consecutive highs (downtrend line) or consecutive lows (uptrend line). An uptrend is defined as higher highs and higher lows. A downtrend is lower highs and lower lows. Trading in the direction of the trend ("trend following") is one of the most reliable strategies.

Volume confirms price movements. Rising prices with rising volume = strong bullish move. Rising prices with declining volume = weak rally, potential reversal. Volume spikes at support/resistance levels often indicate significant buying or selling interest.

Moving Averages smooth out price data. The 50-day and 200-day moving averages are widely watched. When the 50-day crosses above the 200-day, it is called a Golden Cross (bullish). When it crosses below, it is a Death Cross (bearish).

Important: Technical analysis works best for short to medium-term trading. For long-term investing, fundamentals should be your primary guide.