Technical Analysis

What is Technical Analysis? — Definition

Technical analysis is based on the idea that all relevant information is already reflected in the stock price, and that price patterns tend to repeat because they reflect human psychology — greed, fear, hope, and regret. Technical analysts use charts and indicators (moving averages, RSI, MACD, Bollinger Bands) to forecast future price movements.

The debate between technical and fundamental analysis is long-running. Most professional investors use both: fundamental analysis to decide what to buy (is the business undervalued?) and technical analysis to decide when to buy (is the price at a good entry point?). Pure technical trading works better in liquid, actively traded markets.

Example

A fundamental analyst identifies a company as undervalued with strong free cash flow. But the stock is in a clear downtrend, below its 200-day moving average, with declining volume. A technically-informed investor might wait for a trend reversal signal before initiating a position — reducing the risk of 'catching a falling knife.'

BMInsider combines fundamental research from our 100X Insider Reports with technical market tools, so subscribers can make well-rounded investment decisions backed by both approaches.