Does Technical Analysis Work? by Stella Osoba, CMT
Art Meets Science
Yes, it can work, but it depends on how well you understand it and how you use it.
I remember talking to a fundamental investor once about technical analysis. The next day he sent me a line chart and asked me to predict what the market would do. He gave no more information; was it a stock, an index, a commodity, or some other market? Was it a tick chart, a minute chart, an hourly chart, a daily chart, a weekly or monthly chart? Was it a randomly generated line on a chart? Maybe, I said, the market would do what it was already doing, which was rising, or then again, it could fall. How was I to know what would happen the next day from a rising line on a chart? This was probably his way of proving to himself that technical analysis was nonsense. But in doing what he did, he proved nothing.