Factors Not Assumed in Technical Analysis

C

Shifts in supply and demand CAN be observed in market behavior.

Technical analysis is a method of evaluating securities and making investment decisions based on historical price and volume data. It involves studying charts, patterns, and indicators to predict future price movements. To answer the question correctly, we need to identify the factor that is not considered an underlying assumption of technical analysis among the given options.

Let's analyze each answer choice:

A. Supply and demand is driven by rational and irrational behavior. This statement reflects one of the fundamental principles of technical analysis. Technical analysts believe that market prices are influenced by both rational factors (such as economic data and company financials) and irrational factors (such as investor sentiment and emotions). Therefore, choice A is likely an underlying assumption of technical analysis.

B. Prices move in trends that persist for long periods of time. This statement is a core belief in technical analysis. Technical analysts use various tools and techniques to identify and follow trends in price movements. They believe that once a trend is established, it is more likely to continue than to reverse abruptly. Therefore, choice B is likely an underlying assumption of technical analysis.

C. The actual shifts in supply and demand cannot be observed in market behavior. This statement suggests that technical analysis does not consider the observation of actual shifts in supply and demand in market behavior. Instead, technical analysts focus on analyzing price patterns, volume, and other technical indicators to make predictions about future price movements. Therefore, choice C seems to be inconsistent with the underlying assumptions of technical analysis.

D. Prices are determined by supply and demand. This statement aligns with the basic principles of economics and is also a core assumption of technical analysis. Technical analysts believe that market prices reflect the interaction between supply and demand forces in the market. Therefore, choice D is likely an underlying assumption of technical analysis.

Based on the above analysis, the factor that is not an underlying assumption of technical analysis is choice C: The actual shifts in supply and demand cannot be observed in market behavior.