Technical Analysis: Understanding Market Trends and Patterns

Exploring the Fundamentals of Technical Analysis

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Technical analysis -

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A. does not conflict with the efficient market hypothesis. Technical analysis claims that the market moves in trends that can be predicted before they occur. The key to profiting from technical analysis involves a consistent ability to use past and present market data to predict future trends.

B. does not conflict with the efficient market hypothesis. Technical analysts believe that information is disseminated slowly, first to the professionals, and later to the great bulk of investors. This causes stock prices to move in trends.

C. conflicts with the efficient market hypothesis. Technical analysis claims that the market moves in trends that can be predicted before they occur. These trends are caused by the fact that information is disseminated relatively quickly.

D. conflicts with the efficient market hypothesis. Technical analysts believe that information is disseminated relatively slowly, first to the professionals, and later to the great bulk of investors. In contrast, advocates of the efficient market hypothesis believe that information is spreads very quickly and is reflected in stock prices soon after it is available.

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Explanations

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A. B. C. D.

Technical analysts believe that information is disseminated relatively slowly, causing the market to move in trends. They key to profiting from technical analysis lies in finding existing trends and exploiting them. The efficient market hypothesis holds that past market data (which is used to find trends) is already reflected in current prices, making effective technical analysis impossible.

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