CHAPTER 14 Tools and Strategies Based on Technical Analysis
Technical analysis has long been questioned and even ridiculed by many, particularly those in academia. Recent research in areas including behavioral economics, however, may better be able to explain why asset prices move the way they do and why certain trends and patterns develop. Technical analysis shows “what” has happened while behavioral research attempts to explain “why” it has happened. Consequently a newfound interest in technical analysis appears to be rising among investors, financial professionals, and even some academicians.
This chapter takes a quick look back at the history of technical analysis and discusses the underlying logic and primary tools used to analyze assets and markets. The reading that follows explores many types of charts including the line chart, bar chart, candlestick chart, and point and figure chart. The author looks at a number of chart patterns including reversal and continuation patterns and what each could be indicating.
Numerous technical indicators including price-based indicators (e.g., moving averages), momentum oscillators (e.g., relative strength index), sentiment indicators (e.g., put/call ratio), and flow-of-funds indictors (e.g., Arms Index) will be studied. Volume, relative strength analysis, time intervals, and trend analysis will also be reviewed.
The reading looks at market cycles more closely and explores several theories including the Kondratieff Wave, Elliott Wave ...
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