Technical analysis is a technique for analyzing and forecasting price movements in financial markets using historical price charts and market data.
The main premise is that technical analysis is based on the stock’s past movement. While each day is unique, a thorough examination of the stock’s movement in relation to how the market performed on that particular day might show a trend concerning the stock.
The analysis is also dependent on the volume of trading, which is simply the demand and supply of the stock. So, if the demand for the stock appears to be increasing, the analyst will know that the price should rise.
The efficient market hypothesis and technical analysis are sometimes seen as opposing viewpoints. According to EMH, because all information is already absorbed into prices, technical analysis cannot offer any value because prices always trade at their fair value. Technical analysts, on the other hand, feel that there are patterns or trends in price movements that may be found and profitably exploited.