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Does Technical Analysis Work?

Sorry. This article is wrong People misunderstand charting. Technical analysis is not predictive. This is a common misconception passed around by people that apparently have not read up on the subject.

Technical analysis is used to gauge the underlying movement of a stock, irrespective of the fundamentals. Basically, all the charts tell you are which direction a stock is trending and a good guess as to an entry and exit point, as well as a good point to place a stop.

Fundamentals, on the other hand attempt to provide a good guess as to the worth of a company based on what is known about the functioning of the company its sector and the general economy.

Notice that neither function is really predictive. Nobody knows when Nigerian rebels will attack a pipeline, causing the price of oil to jump, but it does happen. Because fundies and techies can't predict the future, neither can really predict a stock's movement.

What fundies can do for you is position your stock choice for the maximum security based on what is known about a company and sector. What the technicals can provide is a good entry and exit point. Neither are predictive.

jegan