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Technical Analysis: The Forefront against the Volatile Stock Market

Filed Under Technical Analysis | Print This Post

It is a standard operating procedure for a corporate organization to conduct an evaluation or analysis on the different aspects of their operation. Every now and then, the executives of a corporate organization must check the reliability and efficiency of their business plan towards various aspects of their operation and assess if there is a need to infuse new concepts on existing plans or change it completely to adapt with the present pace of business environment.

For instance, there are new state laws that have an adverse effect on the way you do business within the state’s jurisdiction. Therefore, there is a need to address potential problems that it may bring to the corporation as a whole. You can address such need by conducting an analysis of the corporation’s existing policies and probably infuse new concepts or apply new ideas to cope up with the effects of such state laws. You may also suggest that you change entirely the existing policies with new ones. Whatever decision you will arrive to, conducting an evaluation and analysis always plays an important role inside your corporate organization.

Such evaluation is known as fundamental analysis. In stock trading (in case the corporation sells its common shares to the public), it is a method of evaluating the performance of a security (in this case, the security referred to is the stocks) by examining the existing corporate policies and other quantitative and qualitative factors. It attempts to create a study about other factors within the walls of the corporate organization (such as cash flow, dividends, and others) that may affect the value of the stocks. In other words, it is an “internal study” of stock performance based on financial data of the corporation.

Another analysis that becomes increasingly popular among different corporate organizations over the past several years is technical analysis. It is a method of analyzing stocks through evaluating various statistical data produced by market activities, past and present prices, and trading volumes in the market. Technical analysts do not try to measure the stock’s intrinsic value (it is the established value based on internal financial data of a company, which is what fundamental analysis is into). Instead, they evaluate it through various stock charts for patterns and indicators that will help them determine the future performance of the stocks.

There are various indicators that analysts consider when performing a technical analysis on a certain stocks. These are, but not limited to, the following:

• Accumulation or distribution index- it is evaluated based on the closing of the stock prices within the trading day’s range. • Average true range- it is the average daily trading range.

• Bollinger bands- it indicates the price volatility range.

• Momentum- it is the rate of any price change within a trading period.

• Money flow- it is the quantity of stock traded on various days, regardless of the price went up or down.

• Point and figure charts- these are charts that are based on prices without considering the time element.

• Stochastic oscillator- it indicates a close position within recent trading range.

Technical analysis is a thing that you should not miss especially if you have future plans of trading the common stocks of your company to various investors. It will help you win over the battle and not to lose until it ends.

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