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Stock Market Technical Analysis


Stock market technical analysis involves predicting future trends and values based on volume and price patterns. The patterns of investors are seen as a driving force behind the behavior of stocks. Because of this, the company's underlying economic conditions are not generally taken into consideration. Analysts reply heavily on the use of price charts to help determine how profitable the buying or selling of stocks will be. Many economists disagree with the concept of technical analysis, with some believing that trends are based on economic conditions, with others believing that these trends cannot be predicted accurately

One of the most popular purposes for a stock market technical analysis is to be able to issue a buy or sell signal. The analysis can help determine whether there is a bull market, which involves increases in values and a bear market, which involves decreases in value. Certain trends can be analyzed via price charts that can help predict whether there will be a reversal in trends. While no analysis method is completely perfect, an analysis can help alert investors as to whether they need to buy or sell. In many cases, technical analysis can be used to predict an impending financial disaster.

There were many clues from stock market technical analysis that indicated the stock market crash of 2008. The failure of several large banks that had lent out subprime loans had a strong impact on the stock market in the United States and around the world. 15 banks failed in that year alone. Several other large, publicly-owned and traded banks had to be acquired by other banks or receive bailout funds from the government. A close analysis of how the banks in question were faring on the stock market helped predict the likely outcome, as well as outcomes if steps weren't taken to correct the problem.

Another example of how stock market technical analysis has predicted trends is the Enron failure. In 2001, a scandal involving accounting practices that were considered nearly fraudulent came to light. A lot of the company's revenue had come from special purpose entities. The losses and resulting debts were not properly reported. Many executives began selling their stock in anticipation of further problems, and Enron's stock declined in value as more news about the scandal was released. A careful analysis of what happens to a company's stock in the wake of a scandal can help predict a possible failure of a company.