Technical analysis is the second stage in picking a stock to buy/sell. You should already have a list of companies whose financial performances match your criteria through
fundamental analysis. Technical analysis concerns studying a stocks chart patterns.
There are many patterns in charts that suggest whether a stock is about to rise or fall. These patterns are taught thoroughly in
stock market trading courses. As well as patterns in the chart, there are several indictors that suggest whether the stock is going up or down. Again, indicators are taught in trading courses.
Example
Below in the main chart area is a horizontal red line, below it are a red and black vertical bar which technical analysts would call a pipe bottom. Technical analysts say that when the stock pattern rises above the high of the down (red line) day then the stock should be considered a 'buy' and as you can see the stock went on to rise around 23%.
(chart courtesy of Telechart 2007)
If a stock satisfies your fundamental and technical filters then the time is right to buy or short the stock.
For detailed technical analysis you will need to purchase
charting software. See the list of
recommended charting software.
