Everyone uses technical analysis to identify “when to buy/sell” along with fundamentals which normally supports to the theory of “why to buy/sell”. But I feel that in the market, buying or selling always starts on the basis of futuristic fundamentals, which is difficult to guess based on current fundamentals. Of course, with the help of macroeconomics we can come on a broader conclusion but then there always remains the scope for “if and but” that many a time makes it difficult for analysts to take a concrete decision, whether to buy or sell in an euphoric scenario like the rise of 2008 and the recent fall of 2011.
The constant macroeconomic
change affects major corporates of the country. In our opinion they are at the
top of the hierarchy of the market participants. Based on their comfort or uneasiness they
start reacting to it. Then the action of corporates’ spreads into other layers
of participants like insiders, operators, mutual funds/ Institutions in a step
by step mode. By the time it comes to retailers half of the story/trend gets
over but then they don’t have any choice but to accept. These major participants “except retailers” who wish to act in real terms with a “buy or sell”, however, have to act only on the platform of the Stock-Exchange. The Stock Exchange provides us the real time data of price and volume of each tick and each day. Here the technical analysis comes into the picture as it mainly follows the “price and volumes” with some simple deviation methods which we is known as an ‘oscillator’.
No matter how smart these major participants and may execute their trades silently, if any technical analyst can read the price properly with the help of other tools then he/she can be an early detector of the climax. Here for T.A. don’t have to wait for results to come or some data. If the price starts seem to diverge negatively/positively which is an indication of reversal in the prevailing trend then T.A. can act accordingly and take the benefit of it scientifically and with some specific strategy put in place.
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