Abstract

A F Mason and D J Joubert Investment basics XXIII Technical analysis 1. Definition At the time when charts were still updated manually, analysts could observe each chart as the price pattern unfolded and The classical method for making investment decisions is the analysis of the financial prospects of all companies that are were therefore able to recognise selected patterns before they were complete. However, this ability was lost when advances candidates for investment. A thorough analysis would require in technology made it possible to find solutions for two fac­ the analyst to begin with a study of trends in the economy, with tors that limited the popularity of Dow Theory, and of any other special attention being given to the particular markets in which approach based on pattern recognition. the companies operate, before proceeding to an estimate of the future financial performance of them all. Using the net Manual charting, and the need for careful visual analysis, res­ present value method, for example, one can reduce the ex­ trict the number of shares that can be analysed by one per­ pected income from each investment to a single value that al­ son. Secondly, considerable skill and experience is