Why it’s important to understand technical analysis

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Nov. 20 2020, Updated 12:58 p.m. ET

Technical analysis

Technical analysis involves predicting future price movements for stocks, commodities, currency, and bonds. Mass investor psychology is analyzed using historical market data. The data includes price, time, and volume.

Mass investor psychology refers to the overall investor optimism, pessimism, and expectation in the market. Since these psychological factors move share prices, technical analysis is considered the “study of mass investor psychology.”

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Technical analyst

The person performing technical analysis is called the technical analyst. The technical analyst uses charts and technical indicators to predict the future price movements. Technical analysts are known for forecasting the probabilities of future price movements.

Technical analysis consists of price charts, volumes, patterns, trend lines, moving averages, and indicators. There isn’t a standard process for technical analysis. One analyst’s guess will be different from another analyst’s guess.

In this series, we’ll discuss the types of charts, price patterns, trends, technical indicators, the Dow Theory, and the Elliot Wave Theory. We’ll also discuss the support and resistance in technical analysis.

Applying technical analysis concepts

Technical analysis concepts can be applied to stocks like Oasis Petroleum (OAS), Hess Corp. (HES), Chevron Corp. (CVX), and ExxonMobil (XOM). These stocks are part of energy sector exchange-traded funds (or ETFs) like the Energy Select Sector SPDR Fund (XLE).

For more information on the previously mentioned companies, visit the Market Realist Energy Commodities page.

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