I didn't used to use TA at all. What I think it is though is...

I didn't used to use TA at all.

What I think it is though is just a lazy way of doing very good fundamental analysis. Rather than trying to value the stock yourself, you just look at the way the big holders are valuing it. Big holders can't get in or out of a stock in days, it takes them months, and they try to do it without anybody noticing. This is what shows up on the charts, and when their sentiment changes, the chart pattern changes. Either because it has reached a price that they consider fair, or things have changed fundamentally in the company to make them revalue it. Smaller holders are usually more emotionally driven, and this tends to add momentum to the swings in the price. Is the price today a bargain, or is the fact that it has lost 50% of it's value recently, and might be going to loose more. It needs to turn decisively for buyers to have to start chasing the price, and that's what I'm waiting for.

So what I'm waiting for dreamcatcher, is that diagonal line sloping down high at the left and low at the right to be broken by the price candles, and for it to stay broken for a few days. Then maybe try to go down a little and bounce back up. This would signal to me, a change in sentiment of holders and potential holders, and then I will buy. I actually think it has bottomed already but you never know how desperate a seller may be.

Similarly Joe, if something significant gets announced, institutions can't take a large chunk in a few days without sending the price beyond their new valuation, so small holders and breakout traders will cause a spike but they will run out of puff eventually. When this happens the price drops a little, break out traders sell, as do those wanting to get out but the price was too low, it is called wave 1 on the way up, and wave 2 on the retrace. About now the institutions start buying, carefully. Eventually this buying starts to drive the price back up, excitement builds, I buy in, and this is called wave 3. Wave 3 should be bigger than wave 1, momentum traders, swing traders, and small holders all pile in. This wave runs out of steam when the momentum traders and swing traders reach their targets. This retrace is wave 4. Wave 5 is mostly consists of those that missed the boat. The stock is too expensive for institutions, and the price usually does a last rocket on high volume, the last of the traders get out, and the price slumps dramatically. This becomes what the Elliot wave theorists call an abc reversal, down, up a bit, down a lot, then the whole process should start again. it can take weeks, months or years for the pattern to play out. It doesn't always work perfectly, but it is surprising how often it comes close.

It's got a lot more to do with human psychology than the true value of the company, and I find it fascinating. Nothing will help on a left field announcement that is truly horrific or spectacular, but luckily they are rare.