What is the basis of Technical analysis ?

Technical analysis is the study of historical price movement of the stock. Study of this charts show, the price movement is always patterned. Almost all patterns are repetitive in nature. This is the basis of Technical Analysis. The repetitive nature of the patterns helps an analyst to forecast the future price movement of the Stock.

Even though this is the basis of the Technical Analysis, analysis is also based on the momentum of the Market. In Stocks, as long as a stock is momentum, the trend is likely to continue. Once the momentum comes down, it foretells a trend reversal. Many of the Technical Indicators are based on this concept.


Another popular method of Technical Analysis is Elliott Wave theory. The basis of this theory is on the assumption that the movement of the stocks are fractal in nature. Fractals are patterns which when dissected turn it to be a same pattern as the original pattern.

Apart from these concepts, there are other type of analysis based on their own assumptions.