Technical analysis suggests the study of the stock markets based solely on the security prices and the historical quotes of each asset. With this methodologies, the trader does not consider rumors, news or events of economic impact during the analysis. While studing the market you can not predict what will be the circunstances of the world...Will there be a war?...Terrorism?...However, we can study the response of the human behaviour to positive or negative events. Market movements comes from pulses of people, people who feel emotions, and to a single event, those emotions cause the price movement in the market. Studing this, you can find patterns in the behaviour of the stocks.
As can be seen in the chart, the price repeats a movement crating two small mountains under the line and finally breaks that pattern. This has consequences that using techincal analysis can be predicted this prediction allow us to act accordingly.
The main tool for technical analysis are the charts of stock prices. In this charts we can see the historical quotes of each asset. Through the study of historical market behaviour, these charts are used to predict a possible future movement. These charts are formed over time and they reflected the opinions and reactions of all involved in the markets, both experts investors (who have exclusive information), as small investors. Here, emotions and psycology of these investors is what will shape the graph reflecting pessimistics, optimistics, rationals or irrational behaviour etc...
Using indicators and mathematical and statistical tools in the analysis of the graphics is something very important in technical analysis.
With the right preparation and a lot of practice, it is possible to find out the real meaning of the price movement. Through mathematical, statistical and econometric modeling procedures, we can eliminate subjectivity in interpreting graphics. Using these technical indicators and analysis of graphics, is possible to determine in which situation are the quotes and predict their future evolution considering their history.