| Technical analysis of stocks involves using charts and | | | | analysis can be used to help predict these future |
| other indicators to predict a stock's future | | | | trends. |
| performance. At it's most basic level, a stock that is | | | | So the answer is that technical analysis can be used |
| rising, as evidenced by drawing a trendline underneath | | | | on both large and small cap stocks, but it is also true |
| the lows the stock has made, will tend to continue | | | | that two other factors should also be considered |
| moving in that direction, until the trend is broken. In | | | | when deciding what stocks are worthy of investment. |
| theory, technical analysis should work for both large | | | | Obviously fundamental analysis is required. |
| and small capitalization stocks. | | | | Fundamental analysis involves examining the company, |
| The counter argument is that it is a real challenge to | | | | and the company's industry, to determine if the |
| use, as the primary indicator, technical analysis to play | | | | investment makes sense. A chart of a horse-show |
| speculative stocks. Fundamental analysis of not just | | | | manufacturer going back 200 years might look great, |
| the sector but the company is often required. Thus | | | | but fundamentally there are very few people who buy |
| technical analysis is more valid with larger companies | | | | horse shoes any more (we drive cars now), so it may |
| as they would have greater analyst and institutional | | | | not be a great investment. |
| interest and for these entities it takes time to | | | | Finally, the perceptions of the world should also be |
| accumulate positions, which often drives up prices | | | | considered. The perfect time to invest in television |
| methodically. | | | | manufacturers was when everyone was saying that |
| I agree that fundamental analysis is important, but I | | | | TV would not replace the radio. The ideal time to |
| don't agree that you can't use technical analysis on | | | | invest in internet companies was in 1995 before the |
| smaller companies; I believe you can use technical | | | | world took notice. Investing in internet companies in the |
| analysis on anything. For example, try plotting the price | | | | year 2000 was the exact wrong time to invest; it was |
| of gas at the pumps, or the temperature for the last | | | | too late, because the world had already discovered it |
| hundred years. You will see trends, and technical | | | | at that time. |