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Why technical analysis?

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Why technical analysis?

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Technical analysis involves studying the price and volume patterns to understand how buyers and sellers are valuing a stock and acting on such valuation. It is really important for the research houses extending commodity market tips to carry out technical analysis. There are three essential elements in understanding price behavior:

a. The history of past prices provides indications of the underlying trend and its direction.

b. The volume of trading that accompanies price movements provides important inputs on the underlying strength of the trend.

c. The time span over which price and volume are observed factors in the impact of long term factors that influence prices over a period of time.

Technical analysis integrates these three elements into price charts, points of support and resistance in charts and price trends. By observing price and volume patterns, technical analysts try to understand if there is adequate buying interest that may take prices up, or vice versa. One should avail of the intraday trading tips for today services after thorough investigation of the research house’s technical analysis capabilities by examining their past records.

Technical analysts have also created a number of technical indicators which help them judge the relative strength of buying and selling interest in the markets. For example, a moving average constructed from prices over a span of many days helps compare where the current prices are, compared to the average prices across the span. If the prices are above, say the 30-day moving average, it is discerned that prices are in an uptrend, at a level higher than what was seen on an average in the last 30 days.

Several other mechanical indicators such as rate of change in price, relative strength indicators and moving-average convergence-divergence indicators are used in technical analysis. The objective of these tools is to understand the underlying pattern in prices and judge the trend in prices for its strength, persistence and possible reversal.

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