0Technical analysis is the study of chart and chart patterns in conjunction with volumes. They generally comprise of two components
Chart patterns-
They are used to analyse historical price action to predict prices in the future. The direction of a trend can be categorised as
- Bullish trend- Higher tops and higher bottoms
- Bearish trend- Lower tops and lower bottoms
- Range-bound- Narrow price movements
Chart patterns can be categorised as bullish, bearish, reversals, continuation and candlestick formations.
Technical Indicators-
Technical indicators on the other hand add value to chart patterns by confirming the direction of a trend either by way of volumes, momentum, overbought/ oversold levels, crossovers and convergence/ divergence.
Technical indicators are developed by analysing past and present data such as open, high, low, close, volumes etc. and are derived into formulas. They are represented graphically and are placed above, below or merged with the price data of a security.
