Technical analysis is a blanket term for a variety of strategies that depend on the interpretation of price action in a stock. Most technical analysis is focused on determining whether or not a current trend will continue and, if not when it will reverse. Some technical analysts swear by trendlines, others use candlestick formations, and yet others prefer bands and boxes created through a mathematical visualization. Most technical analysts use some combination of tools to recognize potential entry and exit points for trades. A chart formation may indicate an entry point for a short seller, for example, but the trader will look at moving averages for different time periods to confirm that a breakdown is likely. The core principle underlying technical analysis is that the market price reflects all available information that could impact a market. As a result, there's no need to look at economic, fundamental, or new developments since they're already priced into given security. Technical analysts generally believe that prices move in trends and history tends to repeat itself when it comes to the market's overall psychology. The two major types of technical analysis are chart patterns and technical (statistical) indicators.
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