Hey Phantom,
Great question.. (and fair question).
I've been a student/practitioner of Technical Analysis since the early 90's,, (although I was around as a trader experiencing the 87 crash and also then losing money on Comex gold options in the 80's -- Ha ha - you live and learn a little)
My early training was with established training from ASIC and ATAA endorsed courses. (and a 'shedload' of both contemporary and conservative books - I still have them)
I'll start from the some original uses and reasons for TA (other readers please go to sleep or 'ignore' at this point)..
This is not necessarily fact ,, just my personal take away from my experiences. (feel free to disagree or enlighten me to alternate truths)
Originally most official and corporate use (and training in TA) centered on using FA and TA... FA for general value assessment. TA for attempting to gain a market feel of sentimentality to optimise entry exit strategies of those FA assessments.
Most original TA was based on pure Trend analysis (ie Up Down , trading range,, and perhaps support / resistance price lines) and used psychological points on a price/volume chart (ONLY price and volume !) . This also incorporated basic Dow Jones Theory ... ie what makes a trend.. Higher highs , higher lows etc (and vice versa).
In general these two departments (ie TA and FA) worked alongside each other in typical fund management or other financial institutions. TA was originally done by many, by actually drawing their own charts - day by day.
The original study incorporated trends or support or resistance points with 'the more SP points reacting to these lines the stronger the trend or support/resistance". The caveat always was 'Volume is critical to supporting the moves' (so when TA people put up a chart these days without a volume overlay I get a little dismayed)..
There were also phases of the markets that were identified, such as accumulation, distribution etc etc and macro phases of bull bear markets.
If you observe these on larger blue chip stocks (perhaps not PM miners) and indices,, I believe the methodologies still give you a better hit / miss risk/reward ratio than without them. (In my case 'breakouts' - ie breaking out above a resistance point or below a support point being my main trading tool automatically gets you in or out of a new trend - depending on a few known and unknown factors more often than not can be a successful strategy - but not always..)
I still remember one of our lecturers who was an experienced broker , after going through all the new confangled indicators and algorithms (at the time).. Said.. Follow macro trends. Then - There's a good case for "if a SP deflects off a resistance point go short,, if it breaks out high, go long.. --- That simple.. (on reflection I liked the breakout scenario better)
In other words if the wind changes direction,, trim/change sails and angle of attack.. Don't get too stressed about forecasting the weather.
I've found that the advice I received at the time was also very relevant. 'Trade with the overall trend'.. I've found I make many more winning trades in bull market , (more than the average) , but still struggle in a bear market (trading bear market rally's in an overall down trend or even sideways channel for the uninitiated is problematic, at best. - and breakouts fail more often)
Then 'patterns' started to become more popular .. Head shoulders , pennant, triangle ,, etc etc
Not long after that came the adoption of Personal Computers and every app imaginable (some black box scams, some simple chart platforms (my time line may not be very accurate on this - but its how I remember it) to allow you to download data daily and do your own thing. And the world went wild on every conceivable 'magic' indicator.
Most current users would use MA's (Moving averages) MACD , RSI, OBV etc but would have no idea what their OBV, RSI or MACD indicators actually means.. (They've watched some young guy on Youtoob who couldn't spell Lithium five years ago, show them how to "make millions on the market." )
This is where the problem lies in my view. Whilst I understand these tools and use them, they are simply not very reliable on smaller stocks (and not foolproof on blue chips for that matter).
Let it be said : A SP that is Oversold through using RSI/OBV/MACD indicators ,,
can be oversold further !
(To the kids that have just started and devotees of some 20yo Yootoob tut tutting me - Sorry,, but I've seen it hundreds of times.. ) .
You can miss 3 baggers or the opposite and worse lose half your money, easily if not careful using just these techniques for trading.
So what has become of TA (particularly on social media) ? Kids sprouting techniques and strategies that they have not tested for themselves over the cycles of boom and busts . (I've seen what? 3-4 long term cycles).. Most still don't know how to draw a trend line or support and resistance, and will wax lyrical about a divergence (simple difference between SP action and underlying indicator. - ie SP goes up, while the indicator is saying down).
So I get your confusion... The answer lies somewhere in between the original concepts and the kid with a new toy.
My personal view. There's no perfect solution, or forecast.
I look at it as part of a Risk/Reward analysis.. - along with size positioning. (Something that rarely gets attention. The professional exponents will place that as highly as following the macro trend scenario.). In the end the original TA was used in a professional environment you recall.
I still use the time honored macro view, trend establishment, general phase analysis, support resistance points (if you can't see them easily, they probably don't exist !, - and require more than one or two points to confirm)..
Yes, I even attempt to do this for the small caps . In addition I also look specifically for Breakouts ,,, and I should mention a caveat.. I also check the simple FA of a company and CASH FLOW.. How many times do you see a a SP come of a bottom accumulation phase and spike on a Breakout just before a Cap Raise ... mmm why is that I wonder?
So yes, I look at all the other stuff (indicators divergences etc) , but they may simply add to or lesson my convictions on a particular trade.. (or my position size for example)
As for PM's ,,, they are much more trickier than the Blue chips or even small caps.. I've been watching these for decades... I see no rhyme or reason apart from the odd and occasional respect to TA reasoning.. - not enough to bet your house on , anyway..
Last word ,, any TA enthusiast who says the SP (or POPM's) "MUST , WILL, WILL DEFINITELY, HAVE TO, CAN'T - do something" should be treated with extreme caution,, and I would put in the category of " only learnt to spell lithium in the last 5 years) -- just my view ,, and no offense meant to anyone in that category..
Phantom ,, If you've managed to still be awake I hope this answers your question ? (it's purely from my perspective ,, others may see it quite differently and still be right in their methodology) .. To other thread posters my apologies, of having to read through this.
(I see the question arise all the time for the very reasons I mentioned - and I like to support TA, as intrinsically it has a purpose I believe - another tool in the box - but be careful how you use it. )
Disclosure:
None of this is advice. I get stuff wrong all the time. And I have my own way of trading and investing which follows a few simple TA and FA rules for entry and exit. I take a little more risk that the original proponents of TA, and attempt to apply it to small caps, as I have other real assets not relating to the stock market. I find that over time, my winning trades result in a better outcomes than my losing trades (even though for example I may have say 3 losing trades to 1 winning trade ,, the losing trades may only be say a 10% loss as opposed to my 2 or 3 bag winning trade - do the math) . This is much easier in a bull market as mentioned. So anyone following my trades are not wise pick a company or trade at random that I may follow ! Is it one of the winners or one of the losers ??)
As for my 'forecasts' on PM's .. It's just a little fun,, and interest waiting for the macro conditions, and London/US traders to let the market move.As for Elliot Waves other cycles etc.. Each to their own.
(20min delay)