What are the advantages of technical analysis?

By

Updated

Advantages of technical analysis

In this part of the series, we’ll discuss the advantages of technical analysis. This is useful for trading strategy.

Article continues below advertisement

Market news reflects the stock prices

The stock price is a reflection of all fundamental news. The crowd market psychology is identified using the patterns. It’s used for price forecasting. This helps investors make informed investment decisions.

Trend identification

The direction of the stock market trend is identified using technical analysis. The stock may be in an uptrend, a downtrend, or a sideways trend. The trend direction is useful when you’re investing and trading in stock markets.

Article continues below advertisement

Entry and exit recommendations

Entry and exit strategy is recommended for short and long-term trading in technical analysis. Fundamental analysis is used for the long-term entry and exit point. When fundamental news is available in the market, the stock price already changed. Some traders use a combination of trend indicators, patterns, volume, and moving averages to determine the entry and exit point.

entry and exit 1

The above chart shows the entry and exit signal for IBM’s (IBM) stock. In the above chart, the stock breaks above resistance. So, entry is suggested. Trendline resistance is used to determine the target level.

Applying technical analysis concepts

The technical analysis concepts can be applied to stocks like Cabot Oil & Gas (COG), Concho Resources (CXO), EOG Resources Inc. (EOG), and Laredo Petroleum (LPI). These companies are part of the S&P Oil & Gas Exploration & Production ETF (XLE).

Advertisement

More From Market Realist