Such a procedure as a technical analysis of the securities market, in the simplest sense, is a study of the status and trends of the stock market. The theoretical and methodological basis of this study is the recognition of the principle of action of external market disturbances. According to this principle, as a result of such disturbances, indicators of trade volumes and, accordingly, indicators of price levels change. That is why a technical analysis of the securities market suggests the possibility of ignoring external factors when researching, and paying the most attention to the dynamics of the market indicators. At the same time, in order to avoid cumbersome research procedures, it is necessary to clearly distinguish between sources that use strategic market analysis and which should be used in technical analysis. Strategic, as such, involves using annual reports, the company's internal press, media publications, expert interviews, exhibitions, benchmarking interviews, a variety of databases from independent sources, trade policy analysis and others.
Another feature, which involves a technical analysis of the securities market, is that the previous parameters of the state of the market can be repeated from time to time, and this makes it possible to identify some development trends based on a comparison of the dynamics of these states, which is very important for its economic forecasting future conditions.
Market conditions are always determined by the nature of the interaction of the two most important indicators of its condition - supply and demand. That is why technical analysis is intended to accurately determine the parameters of their nonequilibrium state: in time, magnitude, repeatability, depth of risk, etc. As a rule, unlike strategic analysis, a technical one should give answers to questions about short-term trends in market dynamics.
The main method of technical analysis is the compilation and comparison of graphs of price trends. They reflect the indicators of time and price. The researcher himself determines the amount of acceptable change (step dynamics), which should be taken into account and then adjust the activities of the company or enterprise, or those whose values ​​can be neglected.
As a rule, these graphs reflect the maximum permissible values.
Resistance line, the value at which the price of assets should not increase. In the technical analysis, it is generally accepted that if the price of an asset goes beyond the resistance line, then this is a sign for its purchase.
The support line is an indicator that indicates that the price of an asset should no longer decline. In this case, a technical analysis of the securities market “signals” the need to sell shares.
Also a common methodology, which is widely used when conducting technical analysis, is the methodology for measuring the price trend, called the “head and shoulders”. This name arose from the appearance of the chart obtained by displaying the values. It contains three peak indicators: one high (larger in value) and two (on the sides of the high) lower in values ​​- the head and shoulders. At the lower values ​​of the peaks of the “shoulders”, a signal line of resistance is drawn, which indicates the need for a change in trend or for its conservation. This method is very common and effective, for example, if necessary, to analyze the market for goods, because it gives a quick and fairly accurate idea of ​​the behavior of the consumer market.
In addition to studying graphs and charts that reflect the behavior of the market, its study methodology also includes analysis of indicators such as trade growth and determining the number of transactions with assets.
There is also the concept of the opposite opinion, which suggests that the investor should act contrary to the technical analysis, that is, take steps opposite to the general current state of the market and even its trends.