Technical analysis is the art and science of examining stock chart data and predicting future moves on the stock market. Investors who use this style of analysis are often unconcerned about the nature or value of the companies they trade stocks in. Their holdings are usually short-term – once their projected profit is reached they drop the stock.
The basis for technical analysis is the belief that stock prices move in predictable patterns. All the factors that influence price movement – company performance, the general state of the economy, natural disasters – are supposedly reflected in the stock market with great efficiency. This efficiency, coupled with historical trends produces movements that can be analyzed and applied to future stock market movements.
