Technical Analysis Basics

Reading Price Charts and Patterns

Technical analysis is the study of historical price and volume data to predict future stock movements. While fundamental analysis asks "what should this stock be worth?", technical analysis asks "where is the price likely to go next?" Many successful PSX traders use technical analysis to time their entries and exits, even if they select stocks based on fundamentals.

The foundation of technical analysis rests on three principles: the market discounts everything (prices already reflect all known information), prices move in trends (uptrend, downtrend, or sideways), and history tends to repeat itself (patterns recur because human psychology is consistent). Key tools include candlestick charts, moving averages (50-day and 200-day are most popular on PSX), support and resistance levels, and volume analysis.